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Lyft craters to a record low after its first quarterly report disappoints, Uber IPO looms (LYFT)

Wed, 05/08/2019 - 4:07pm

  • Lyft shares fell nearly 11% to a record low on Wednesday after reporting quarterly results for the first time as a public company.
  • Lyft did not break out gross bookings data in its report, which disappointed analysts looking for further detail on its growth.
  • Uber, Lyft's biggest rival, is expected to price its initial public offering on Thursday and begin trading on Friday.
  • Watch Lyft trade live.

Lyft plunged nearly 11% to a record low on Wednesday after the ride-hailing company unveiled its first quarterly results since going public.

Shares closed on their session low of $52.91 a share, bringing their post-IPO loss to 26.5%.

While Lyft handily topped Wall Street's expectations for its first-quarter sales and second-quarter outlook, Lyft left out some key details, according to analysts.

Read more: Lyft is whipping around after delivering earnings for the first time as a public company

On Lyft's conference call Tuesday evening, management was optimistic about the competitive landscape, which was a positive indicator about eventual profitability, according to Asad Hussain, an emerging technology analyst at PitchBook.

"However, Lyft withdrew providing gross bookings data, which complicates the ability of investors to understand pricing trends," Hussain said in an email.

While the market doesn't typically appreciate those kinds of "data pull-backs," Hussain said, he wouldn't be surprised if Uber were to make a similar move when the time comes for its own quarterly reports.

Judging by the market's severe reaction, Thursday's report did little to quell the investment community's long-term concerns about Lyft's growth prospects. Shares have fallen 23% from where they priced in late March.

Lyft offered encouraging results in its report, but still has "a lot to prove," Guggenheim analyst Jake Fuller said in a note to clients Wednesday morning. Fuller, who has a "neutral" rating on Lyft, said the report was light on details.

"Limited detail from LYFT around core metrics like number of rides, bookings and take-rate make it more difficult to decipher trends in unit economics and competitive dynamics," he wrote.

In a bright spot, management announced a new partnership with Waymo, which PitchBook's Hussain sees as a win for Lyft given the "long-term existential threat posed by autonomous vehicles." 

The report comes ahead of Uber's expected public market debut later this week. Lyft's much-larger competitor is expected to price its initial public offering Thursday and begin trading Friday. Analysts have long cited Uber as a major threat to Lyft.

At an expected market value of between $80 billion and $86 billion — Uber would be the third-largest US-listed IPO on record, according to Dealogic. Only Alibaba and Facebook's debuts were larger.

Read more Lyft coverage from Markets Insider and Business Insider:

Lyft says 2019 will be its 'peak loss' year

Lyft went public at a $24 billion valuation. Here's how that compares to other high-profile tech companies dating back to the dotcom bubble.

Uber and Lyft drivers are striking in over a dozen cities around the world on Wednesday. Here's the full list of where demonstrations are planned.

Lyft plunges below its IPO price

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These 8 Lyft investors are taking a big hit on their holdings (LYFT)

Wed, 05/08/2019 - 3:25pm

  • Ride-sharing app Lyft has suffered through volatile trading since its March initial public offering.
  • Shares have plunged 23% from their IPO price of $72, with investors recording paper losses. 
  • Watch Lyft trade live.

Lyft investors have had a rocky road since the initial public offering on March 29. The ride-sharing company's shares are down 23%, well below the initial-public-offering price of $72, wiping nearly $5 billion off the company's market cap.

These developments have important implications for the valuation of Uber's IPO, widely expected to be the largest of 2019. Uber is expecting to go public as early as Friday.

While every Lyft investor who got in ahead of the IPO has seen their Lyft holdings decline in value, Markets Insider picked out eight to highlight. 

To be clear, it is unclear at what price these investors originally purchased shares, and some or all could still be up significantly on their original investment. Also, these are paper losses, and Lyft's shares could yet rebound.

Rakuten

Description: Largest Japanese e-commerce and internet company

Shares: 31.4 million

Stake: 11.5%

Paper loss since IPO: $518 million

 



General Motors

Description: Largest US auto manufacturer, selling 3 million vehicles in 2018.

Shares: 18.7 million

Stake: 6.8%

Paper loss since IPO: $308 million

 



Fidelity

Description: Largest privately held mutual-fund company, managing $2.5 trillion.

Shares: 18.5 million

Stake: 6.8%

Paper loss since IPO: $305 million

 



See the rest of the story at Business Insider

Uber is reportedly set to price its IPO at the midpoint of its target or below, giving it a valuation of as much as $86 billion

Wed, 05/08/2019 - 2:52pm

Uber is set to price its initial public offering at the midpoint of its target range or below, according to a Wednesday report from The Wall Street Journal that comes ahead of the ride-hailing giant's expected Thursday pricing and Friday stock-market debut.

If Uber's stock were to price at the midpoint of its expected range, at $47 a share, its valuation on a fully diluted basis would be about $86 billion, The Wall Street Journal's report said, citing people familiar with the matter.

Uber last month said it planned to sell 180 million shares in its public offering at a price between $44 and $50 a share, which would value the company at $80 billion to $90 billion.

These numbers are well below the initial valuation expectations floated in earlier reports. Uber had sought a valuation as high as $120 billion, sources told Reuters last month.

The lower pricing was influenced by the disappointing stock-market performance of its competitor Lyft, according to The Wall Street Journal. Some investors said they were waiting for Lyft to report earnings on Tuesday before placing their orders for Uber's IPO.

Lyft shares have tumbled 23% from their IPO price in March and 37% from where they first traded. The dismal performance comes after enthusiastic investor appetite for Lyft's shares, according to Reuters.

Put another way, Lyft's rapid decline in its first month of trading was the second-worst opening-month performance of a large US-listed IPO, according to Dealogic. Only Facebook's 21% decline in 2012 was worse than Lyft's 20.5% drop. 

Still, Uber's expected valuation ranks among the largest US IPOs on record.

If Uber priced at the midpoint of its range between $44 and $50 a share, it would be the third largest, trailing only Alibaba and Facebook, according to a Dealogic analysis.

The San Francisco-based company's offering also comes at a delicate moment in the US stock market. Stocks have gotten whipped around all week by developments in the US-China trade war, though equity markets are within striking distance of their all-time highs.

Uber did not respond to Business Insider's request for comment on Wednesday afternoon.

Read The Wall Street Journal's story here.

Now read more Uber and Lyft coverage from Markets Insider and Business Insider:

Morgan Stanley, Goldman Sachs, and all 27 other banks working on Uber's mega-IPO

Uber may owe another $128 million to Google for awards related to Uber vs. Waymo

Lyft plunges to an all-time low amid reports Uber is seeking a valuation of up to $100 billion

Join the conversation about this story »

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Silicon Valley startup uBiome raised $105 million on the promise of exploring a 'forgotten organ.' After an FBI raid, ex-employees say it cut corners in its quest for growth.

Wed, 05/08/2019 - 2:32pm

  • In April, the FBI raided the offices of the microbiome-testing startup uBiome, reportedly as part of an investigation into questionable billing practices.
  • On the heels of the raid, uBiome placed co-CEOs Jessica Richman and Zac Apte on administrative leave.
  • Interviews with insiders revealed concerns at the company that extended beyond billing issues, however.
  • They said a quest for growth drove the company to cut other corners as well, including on its science.
  • Visit Business Insider's homepage for more stories.

The Silicon Valley healthcare startup uBiome is in hot water over its reportedly questionable billing practices, but insiders say problems at the company extend beyond issues tied to insurance claims.

After an FBI raid last month and reports of an investigation into how the startup charges customers for some of its tests, uBiome suspended sales of two of its tests and placed its co-CEOs on administrative leave. The company runs lab tests that provide information about the bacteria in your body, called the microbiome. Most of the tests work by having customers use a swab to take a sample of their poop from recently used toilet paper.

The microbiome is a growing area of scientific interest. It has been dubbed the "forgotten organ" thanks to its apparent role in affecting everything from your mood to your risk of disease. uBiome has raised $105 million from investors such as the Silicon Valley tech accelerator Y Combinator and Bryan Johnson's OS Fund, achieving a valuation of $600 million, according to PitchBook.

Read more: I tried a test that let me peek inside my microbiome, the 'forgotten organ' that scientists say is the future of medicine — and what I learned shocked me

Problems at uBiome have been brewing for at least a year, according to internal documents and interviews with three former employees. The interviews, with people who worked in uBiome's science, billing, and marketing departments, suggest a company that started out with a strong emphasis on science but then may have cut corners in a quest to show faster growth.

Two former employees said that the company billed individuals and insurers repeatedly as a way to boost revenue figures that it showed investors. Both people said that in some cases, uBiome would run a test multiple times on the same sample to generate extra bills, even in cases where that wasn't needed. The people asked not to be identified because they signed agreements not to reveal company information publicly.

"We'd get people to unwittingly sign up for six tests and then hound them over email to repeat them," one former employee said. "Then we'd have the opportunity to bill people for six tests instead of one. It wasn't necessarily in the patient's best interest."

Additionally, one of the former employees said the bulk of the company's billing department was in Argentina, meaning that people who worked in billing at the company's US offices had less oversight and involvement in what was going on, in that employee's view.

Although uBiome initially prided itself on putting research first, not all aspects of all of its tests were backed by the same level of rigorous science, Elisabeth Bik, uBiome's former science editor, told Business Insider. Beyond that, the company used questionable tactics to encourage doctors to sign off on the tests, the two other former employees said.

"It felt like the science became less and less important to them over time," Bik said.

uBiome declined to comment for this article.

uBiome started as a science project, then raised its profile

uBiome began as a citizen science project that sought to create a large public database on the microbiome, the rich assortment of bacteria that thrive in our bodies and appear to influence everything from our mood to our risk of certain diseases.

In recent years, uBiome had been raising its profile. The San Francisco-based company collected thousands of samples, published cutting-edge science, and signed research partnerships with major brands, such as L'Oréal.

Last month, the FBI raided its offices in what The Wall Street Journal said was part of an investigation into questionable billing practices. After the raid, the company placed cofounders and co-CEOs Jessica Richman and Zac Apte on administrative leave, naming John Rakow, uBiome's general counsel, its interim CEO. The company said it would undertake an independent investigation into its billing practices and cooperate with inquiries from the government and health insurers.

uBiome sold four different tests, three of which had to be ordered by a doctor. The company portrays those three tests as covered by health insurance, but statements and complaints viewed by Business Insider suggest that insurance companies often don't pay for them. Anyone can order uBiome's fourth test, called the "Explorer," which is portrayed as a fun way to learn more about the microbiome and costs $89.

The fact that insurance doesn't cover the doctor-ordered tests wasn't clearly communicated to customers, in two former uBiome employees' view.

Complaints start to stream in

Problems started to crop up at uBiome in fall 2018, all three former employees said, when complaints from customers and insurance companies turned from a trickle into a steady stream.

At that time, the insurance company Aetna flagged uBiome's billing practices and put uBiome on notice, according to a former employee at uBiome and another source familiar with the matter.

Business Insider has previously reported on complaints from customers who received unexpected bills after using the company's tests. Some of them had signed up under uBiome's pilot program, which told potential test takers in big letters "No cost to you."

If the health insurers didn't pay, the individuals thought they wouldn't be on the hook for the costs. But instead, the people said in the complaints that they were left with bills of as much as $3,000.

Read more: Customer complaints show $600 million health startup uBiome has been surprising patients and insurers with bills for years

Also, patients were often billed multiple times for the same test. That was often based on the premise that the science in uBiome's database had been significantly updated, according to two former employees and internal documents viewed by Business Insider. But they said that this wasn't always true. In many cases, the science was only incrementally altered, if at all, they said.

The employees also raised concerns about the process uBiome was using to have doctors sign off on the tests. Two said that customers were essentially diagnosing themselves with a disease like irritable bowel disease — often online, based on things they read on uBiome's website — and ordering a test. Then, uBiome would send the order to a list of doctors who were likely to approve it, the employees and the internal documents suggested.

CNBC previously reported on uBiome putting pressure on clinicians to approve tests with minimal oversight and dismissing at least one doctor who did not green-light tests fast enough.

A test that may not belong in doctors' hands

Beyond the issues raised by employees about the ordering process for uBiome's tests, Bik said there were scientific reasons that one of the tests was not ready to be used in the way it was portrayed.

uBiome sells doctor-ordered tests, including SmartGut, which looks at the gut microbiome to test for gut conditions and metabolic disorders, and SmartJane, a test that looks at the vaginal microbiome to test for sexually transmitted diseases and chronic vaginal infections. The company placed the most marketing and research emphasis on its SmartGut test, two former employees said.

Bik, a molecular biologist and former Stanford researcher who served as uBiome's science editor between October 2016 and December 2018, was responsible for helping uBiome publish research papers, vet the science behind its products, and edit the text that appeared on uBiome's website.

She said there were components of the SmartGut test with solid scientific backing that she felt could reasonably be covered by insurance. But other parts of the test offered a less-clear benefit to customers, in her view. As a result, she said she did not think there was a strong argument for insurers to cover the complete cost of the SmartGut test.

Bik said the test is not diagnostic, meaning it can't tell patients with certainty whether they have a serious condition such as inflammatory bowel disease. Despite this, promotional materials from uBiome suggest that the SmartGut test helps diagnose these conditions. Materials on uBiome's website for the SmartGut test read: "detects beneficial and pathogenic microorganisms associated with gut conditions like irritable bowel syndrome (IBS), and inflammatory bowel disease (IBD), including ulcerative colitis and Crohn's Disease."

"We cannot even come close to the diagnosis of a disease," Bik said.

Still, there were parts of the SmartGut test that Bik said made sense for insurers to cover. One component of the test, for example, could identify the presence of an infection, such as salmonella, by testing for bacteria linked with that infection.

Billing tactics driven by a desire to show Silicon Valley growth

The SmartGut test was a lot more lucrative for uBiome than its other tests, two former employees said.

uBiome encouraged customers to take up to six SmartGut tests under the premise that those tests would help track a person's well-being over time, according to those former employees and internal documents. In some cases, uBiome would repeatedly reach out via email to encourage people to order another test.

uBiome was not up front with customers about the fact that it would bill them for each test, the former employees said.

Meanwhile, the financial figures uBiome shared with investors were based on billing tied to running multiple tests, according to the former employees and internal documents.

"They just wanted to see that graph that showed it going up and to the right," one former employee said.

Additionally, the scientific updates that uBiome would perform on the tests in order to rebill customers were not always warranted or significant, one former employee said. Instead, leadership from inside the company was pushing the rebilling practices as a way to make up for slowdowns in sales, according to the employee.

"People were trying to find any reason why we should bill the samples that were already in-house again," the person said.

Bik said she could understand why a clinician might want someone with a serious disease such as Crohn's to take the test multiple times as a way of getting a better hold on what's going on in someone's gut over time.

Still, she agreed with the other former employees that uBiome may not have been clear in communicating to patients when or why they should take multiple tests — although she was not heavily involved in the billing practices and couldn't say for sure. She also said she didn't believe that kind of use justified coverage from insurers.

Although Bik questioned the strength of the science behind the SmartGut test, she said she stands strongly behind other uBiome products in which the science is more solid. For the SmartJane test, for example, which looks at vaginal health and must be ordered by a doctor, Bik said there was a "very clear relationship" between the kinds of bacteria the test could identify and vaginal health.

"If I had to choose one test that I'd consider being doctor-prescribed, that test is a much better candidate," Bik said.

She also still believes the company's Explorer test, the one test uBiome offers that is not doctor-ordered, is a great way to help people learn about their microbiomes in a fun, non-risky way.

But "we made very clear that's not a diagnostic test," Bik said.

Lydia Ramsey contributed reporting.

Want to tell us about your experience with uBiome? Email the author at ebrodwin@businessinsider.com.

SEE ALSO: I tried a test that let me peek inside my microbiome, the 'forgotten organ' that scientists say is the future of medicine — and what I learned shocked me

DON'T MISS: As Silicon Valley tech giants like Facebook and Juul push into healthcare, they see revolution. Outside experts see red flags.

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Billionaire real-estate investor Sam Zell says now is 'the time to accumulate capital' for future real-estate buys as a glut approaches

Wed, 05/08/2019 - 2:27pm

  • The real-estate investor Sam Zell told attendees of this week's SALT conference in Las Vegas that there would be a chance to buy discounted real estate in a couple of years, specifically apartments and office buildings.
  • While prices are less "speculative" now than they were four or five years ago, Zell said, he still suggested now was the time to be adding to your cash reserves, not pushing it into the real-estate market.
  • The controversial billionaire investor, who made headlines last year for using vulgar language when talking about hiring more women in the investment industry, also called President Donald Trump's $2 trillion infrastructure plan "a lot of bullshit."

The billionaire real-estate investor Sam Zell is building up his pool of cash, planning to put it to use in a couple of years.

Compared with four or five years ago, prices for real estate have become "less speculative" but are still too high for Zell's taste, the founder of Equity International told attendees of this week's SALT conference in Las Vegas.

"I think there's going to be an opportunity" in the next few years, Zell said, to buy cheap apartment and office buildings because of oversupply.

"We've seen a lot of apartments built in the last years, we've seen a staggering amount of office space," he said, saying he didn't believe the demand matched the new construction.

Because of this coming opportunity, Zell said "this is the time to accumulate capital."

Read more: Big-money investors are piling into 'opportunity zone' funds in lower-income neighborhoods, but there are a bunch of reasons to be cautious

The billionaire investor, who was uninvited to UCLA last year because of vulgar comments he made about hiring women and his controversial ownership of the Los Angeles Times, also described the $2 trillion infrastructure plan recently proposed by President Donald Trump and top Democratic leadership as "a lot of bullshit."

"I don't think it's real," Zell said, while also acknowledging that the country needed infrastructure upgrades.

"Public and private partnerships, unless there's a specific project in mind, don't work," he said.

Zell also pushed back on his fellow real-estate developer, saying Trump's immigration stances would not help the country.

"I don't think anyone in this room thinks this country is full," said Zell, whose parents immigrated to the United States from Poland at the beginning of World War II.

"We don't have enough competent, qualified, educated people."

Read more: Democrats say Trump has agreed to work on a $2 trillion infrastructure plan, but there's a big catch

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Trump's threat to sharply increase tariffs would hit China's economy like a sucker punch

Tue, 05/07/2019 - 9:47pm

  • If the US hikes tariffs on $200 billion worth of Chinese goods to 25%, as President Donald Trump and his trade representatives have threatened, the result would be sudden and devastating.
  • While the Chinese economy appears stable, that only happened after a number of measures policymakers enacted in the first quarter.
  • More stimulus would likely mean impacting China's already frothy property market, which could make a delicate situation even more precarious.
  • "It's not clear to me that the old playbook — infrastructure investment and tax cuts — it's not clear if that's going to be enough to cushion this,"  analyst Charlene Chu of Autonomous Researchshe told Business Insider.
  • Visit Business Insider's homepage for more stories.

If the US's tariffs on Chinese goods increase to 25% on $200 billion worth of goods on 12:01 am on Friday, as President Donald Trump and his top trade advisers have threatened, it will hit China like a sucker punch — an unexpected, devastating blow that will leave policymakers reeling, at least for a moment.

"I did not see it coming," said Charlene Chu, a senior analyst at Autonomous Research dubbed the 'rockstar of Chinese debt analysis.'

"If we think about what happened over the last year we have a credit induced slowdown... there's a straight forward fix [to that], just increase credit. But this is a very different type of shock... It's not clear to me that the old playbook — infrastructure investment and tax cuts — it's not clear if that's going to be enough to cushion this."

Believe it or not

You may recall what was happening to the Chinese economy earlier this year. Indicators were flashing red. Small and medium sized enterprises (SMEs) were struggling to get credit. Consumers were getting crushed under debt servicing costs. 

Chu says that business owners she talked to were looking at moving their operations to Vietnam or Burma. The currency continued to slide  and sentiment was dark. To stabilize the economy the government stepped in with a package of credit easing and tax cuts that undid all of the tightening it had done since 2016, according to Chu's research. The economy came back to life and the world was happy. Stocks rallied.

This 25% tariffs threat though — that's another animal. When this correspondent talked to Wall Street China watchers on Monday morning, no one thought the Trump administration would go through with it. It would be too devastating for China, the world, and the US (in that order).

By Tuesday, after Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer made statements backing up Trump's declaration, people started changing their tune.

Analysts at Morgan Stanley told clients that the tariff increase is more likely now that they know the US and China are fighting over fundamental changes the Chinese economy.

"It now appears that the impasse is over more critical and numerous issues than previously thought, and the delay in talks this week leaves little time for resolution before 12:01 am Friday," they wrote. 

But there's still time. Chinese Vice Premier Liu is still headed to Washington on Thursday to try to talk things out, but if he fails the tariffs could go into effect while he's in the US capital.

What 25% can do

China's last slowdown was not caused by Trump's trade war, but rather by the country's addiction to credit. In 2018 the government pulled back from credit stimulus measures it took in 2016, and the results were more damaging than policymakers imagined. 

That isn't to say that tariffs were insignificant. As it stands there are 10% tariffs on $200 billion worth of goods and 25% on $50 billion worth of goods. According to analysts at Societe Generale the one-two tariff punch knocked 0.1-0.2 percentage points off China's real GDP growth since it went into effect last September.

What's more interesting is what happened to that $50 billion worth of goods. Exports of those goods contracted by 30% year-over-year from February of this year to last, according to the analysts.

"Should the US decide to raise the tariffs on $200 billion goods to 25% on Friday, we estimate the hit to growth would be an extra 0.2-0.3 [percentage points]. If the US were to impose 25% tariffs on all Chinese exports, there would be another 0.5 [point] drag on growth, thus bringing the total damage to 1 [point]," the analysts wrote. 

The International Monetary Fund sees an even uglier picture, estimating that all US tariffs taken together could shave 1.6 points off Chinese GDP in 2019. 

Mayday

If this happens China does have options, according to Leland Miller of China Beige Book, a survey of the Chinese economy. Policymakers could continue cutting reserve requirement rates, as they did recently for small and medium sized banks. They could conduct wider easing too. All of this will be helped by the fact that rates around the world are so low.

But Chu says it's unlikely that playbook will be enough, and so it will be hard to stabilize the economy without touching a massive, frothy sector: the property sector.

"They could pull that lever and it would make a difference but it's the one area they themselves worry about," she said. "We're talking about a very imbalanced property market becoming more imbalanced."

Restrictions on the property market vary from locality locality, but, in short, the Chinese government could enact regulatory changes to incentivize real estate transactions. Those tweaks could in turn boost the Chinese economy and blunt some of the tariff impact.

If the tariffs hike happens, concerns about the property market overheating will have to wait. The Chinese stock market will need help, and the yuan will need support as well.

When the 10% tariff was put on $200 billion worth of goods, the yuan slid. That wasn't such a bad thing, though, because it offset the impact of the tariffs. Chu says that can't happen this time. The 25% tariffs is too large to expect the yuan to offset it. It could force the yuan past its psychological barrier of 7 yuan to $1.

"If the yuan crosses through 7, 7.2, 7.4 [per dollar]... believe that global markets will start freaking out," she warned. "Asian currencies will start moving, global equities will be tanking, bond yields will spike, the whole world will feel this."

Now the Chinese government could retaliate, but the US doesn't sends far fewer exports to China than China sends to the US. That means China could retaliate by hurting US companies in China (think: boycotts, protests).

"We [the US] are in a much better position but there's no doubt that there will be pain over here," Chu said. "This is the manufacturing center of the world, and you're talking about the largest trading relationship that they have going very bad... that has huge ramifications."

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There hasn't been this much risky corporate debt in years. The Fed is sounding the alarm about what that could mean for the economy.

Tue, 05/07/2019 - 9:40pm

  • In 2018, the amount of leveraged loans increased by 20% to above recent peaks in 2007 and 2014. 
  • The Federal Reserve this week flagged the sharp rise as a risk to the financial system.
  • But institutions appear more resilient than before the financial crisis. 

A rapid rise in levels of risky corporate debt has emerged as a top vulnerability in the world's largest economy.

Leveraged lending in the US jumped by one-fifth to $1.1 trillion in 2018, above peaks seen during the financial crisis, the Federal Reserve said in a semiannual report out Monday.

That was particularly concerning because the largest increases were concentrated among the riskiest firms, which have lower credit ratings and large amounts of debt. Credit standards for business loans appear to have loosened over the past six months.

Default rates in leveraged lending remain relatively low, but officials cautioned that this could change in the case of a slowdown.

"Even without a sharp decrease in credit availability, any weakening of economic activity could boost default rates and lead to credit-related contractions to employment and investment among these businesses," the report said.

While the economy grew at a far faster pace than was expected in the first quarter, forecasters said underlying trends pointed to cooler growth in the coming months. Officials highlighted a series of strains that could lead growth to falter, including global trade tensions and slowing activity in Europe and China.

Collateralized loan obligations, which are bundles of leveraged loans sold in tranches, reached record levels in 2018 and accounted for more than half of outstanding leveraged loans. But the Fed said that this type of loan has become far more stable than in the run-up to the Great Recession a decade ago.

"Compared with the investment vehicles associated with subprime mortgages in the financial crisis, CLOs are structured in a way that avoids run risk," the report said.

It's not unusual to worry about a boom-and-bust situation at this point in the business cycle, Ryan Sweet, an economist at Moody's Analytics, said. The expansion that began in 2009 is set to become the longest in history this July.

"While there are significant differences between leveraged lending and subprime mortgage lending, the similarities are eerie," he said.

In November, the Fed flagged similar risks to nonfinancial corporate borrowing.

"The good news is that because everyone is talking about the leverage loan market, including regulators, odds are this won't kill this expansion," Sweet said.

SEE ALSO: Trump's top trade negotiator confirms the China tariffs will increase on Friday, accuses Beijing of walking back on trade deal

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Trump's tax records show his businesses lost so much money over a decade, he didn't have to pay income taxes for 8 of those 10 years

Tue, 05/07/2019 - 8:43pm

  • President Donald Trump's tax information covering the years 1985 to 1994 show a business empire nearly in ruin, according to financial information obtained by The New York Times.
  • Trump's negative adjusted gross income allowed him not to pay any income tax for eight of those years, according to the records.
  • The filings show that in 1985, Trump lost $46.1 million from his casinos, hotels, and apartments. These businesses kept losing money annually for a total loss of $1.17 billion over 10 years, according to The New York Times.
  • Visit Business Insider's homepage for more stories.

President Donald Trump's tax information covering the years 1985 to 1994 show a business empire nearly in ruin, so much so that his negative adjusted gross income allowed him not to pay any income tax for eight of those years, according to The New York Times.

The tax information, first reported by The Times on Tuesday, revealed that Trump's businesses were not as successful as the future president made them out to be:

  • In 1985, the filings show Trump lost $46.1 million from his casinos, hotels, and apartments. These businesses kept losing money annually for a total loss of $1.17 billion over 10 years, The New York Times reported.
  • In 1986, his businesses had a loss of $68.7 million, according to The Times.
  • In 1987, Trump purchased a $29 million yacht and a $407 million hotel despite the stock market taking a plunge. He reported his businesses lost $42.2 million in 1987 and $30.4 million in 1988.
  • Trump's business losses between 1990 and 1991 totaled more than $500 million.
  • Citing Trump's tax filings and publicly available data from the IRS, The Times reported Trump "appears to have lost more money than nearly any other individual American taxpayer" when compared with other wealthy individuals.
  • The losses meant that Trump avoided paying income tax for eight of the 10 years documented in the tax information cited by The Times.
  • Additionally, Trump's income shifted annually. In 1988, he earned a more than $67 million salary, and he received a "mysterious" $52.9 million in interest income in 1989.
    • Trump's $67 million salary was 90% of his total regular wage during the 10-year period.
    • Trump's interest income shifted dramatically. In 1990, he reported $18.7 million, and in 1992, he reported $3.6 million.
  • Between 1986 and 1988, Trump suggested he would buy out numerous companies. The suggestions earned him millions of dollars, but the gains were short-lived after investors stopped taking him seriously, The Times reported.
  • In 1989, Trump's businesses reported a loss of nearly $182 million, according to The Times.
  • The Times said Trump borrowed $10 million for his Mar-a-Lago resort in Florida. But this investment appears to have been fruitful — financial disclosures from 2017 claimed the estate is worth over $50 million, according to The Sun-Sentinel.

Trump portrayed himself as a wealthy business mogul before his presidential campaign and has continued to do so throughout his presidency.

"There is no one my age who has accomplished more," Trump told Newsweek in 1987.

Trump's attorney Charles Harder said the tax information The Times cited for its report is "demonstrably false" and "highly inaccurate."

"IRS transcripts, particularly before the days of electronic filing, are notoriously inaccurate," Harder said, without offering any evidence to support that assertion.

Read more: Democratic lawmaker asks IRS for 6 years of Trump's tax returns

The Times' reporting does not answer lingering questions about Trump's more recent tax returns, which have been a contentious topic during his presidency. Democrats have questioned Trump's financial dealings and have asked for six years of his tax returns.

Democratic Rep. Richard Neal of Massachusetts, the Ways and Means Committee chairman, previously demanded that Treasury Secretary Steve Mnuchin direct the IRS to release the returns for a select group of lawmakers.

Mnuchin rebuffed the request, citing a lack of a "legitimate legislative purpose."

Trump defied decades of precedent as a presidential candidate by refusing to release the tax documents and has continued to keep them from the public as president. Trump said he could not release his returns while he is under audit by the IRS.

It is unclear if Trump is being audited by the IRS. There is no law that prohibits a tax filer from releasing his tax returns during an audit.

SEE ALSO: 'It must really suck to be that dumb': Republican senator says Democrats aren't 'fooling anybody' with Trump tax-return request

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Many traditional VCs are hesitant to buy into cannabis startups, but these investors are taking the plunge

Tue, 05/07/2019 - 8:17pm

  • Traditional venture capital firms are starting to show interest in cannabis startups, according to Casa Verde Capital Manager Partner Karan Wadhera.
  • Wadhera spoke on a panel at DCM's CannTech conference in San Francisco on Tuesday about the hurdles other firms face when making their first cannabis investment.
  • Wadhera said that, in addition to smaller specialized firms, Tiger Global Management has been a key player in funding cannabis startups in California.
  • Visit Business Insider's homepage for more stories.

Venture capital is upping its tolerance for cannabis investments.

At DCM's CannTech conference in San Francisco on Tuesday, Casa Verde Capital Manager Partner Karan Wadhera spoke about the hurdles facing venture firms that want to invest in cannabis startups but have partners that are not yet comfortable wading into the murky legal waters.

"Every major firm in San Francisco has looked at the space," Wadhera told conference attendees Tuesday. "Everyone here has gotten time with some of the top firms in the city. Some [firms] are ready and some are coming in steps."

Read More: A former Netflix creative director just got $1.6 million from big names in tech for Liquid Death, which is water in a tallboy can

According to Wadhera, federal legalization would help make hesitant investors take the first step in funding a startup in the cannabis industry. He said his firm, which was started by rapper Snoop Dogg, currently focuses on ancillary startups like Eaze, a cannabis marketplace, that "don't touch the plant," so the firm has not seen a lot of pushback from investors.

"The space is changing dramatically," Wadhera said. "There are a lot of big bills in front of Congress right now and when they are passed it will give people more comfort with investing."

In addition to smaller firms that specialize in funding the ancillary companies, Wadhera said Tiger Global Management has been one of the larger key players in funding all types of cannabis startups. According to Pitchbook, Tiger Global Management invested in three cannabis companies including vaporizer maker Pax, regulation tracking platform Metrc, and point-of-sale platform Green Bits.

SEE ALSO: Carta, the startup building a stock exchange for startups, says its own valuation increased nearly $1 billion in 5 months

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IBM CEO Ginni Rometty said Red Hat will remain independent because 'I don't have a death wish for $34 billion' (IBM, RHAT)

Tue, 05/07/2019 - 7:53pm

  • IBM CEO Ginni Rometty reaffirmed that Red Hat will remain an independent company after IBM completes its $34 billion acquisition.
  • Rometty joked that she had "no death wish" buying Red Hat: "I'm not buying them to destroy them."
  • IBM's plan to gobble up Red Hat has been met with some skepticism, even though some analysts call it a smart move that would boost the company's position in cloud computing.
  • Visit Business Insider's homepage for more stories

IBM Chief Executive Ginni Rometty kicked off Red Hat's big summit in Boston by reaffirming that the open-source software company will remain independent once Big Blue completes its $34 billion acquisition.

"I don't have a death wish for $34 billion," Rometty quipped in a lively conversation on Tuesday with Red Hat CEO Jim Whitehurst. "I'm not buying them to destroy them. It's a win win for our clients. It's a way to drive more innovation."

Rometty's comments were met with applause and laughter at the gathering.

IBM's plan to buy Red Hat, which was unveiled in October, has been viewed as a bold move to beef up its cloud arsenal.

In a statement, Rometty had called the move a "a game-changer" that "changes everything about the cloud market."

Some analysts have been skeptical, especially as IBM struggles to keep up with stronger rivals in a market dominated by Amazon, Microsoft, Salesforce, and Google. The move has also sparked worries on what being gobbled up by Big Blue could mean for Red Hat's future.

That was clearly what Rometty's light-hearted remarks on Tuesday sought to address. And it appeared to work for some who listened to the conversation.

"Who knew Ginni had such a good sense of humor?" one attendee tweeted.

Some analysts also think the Red Hat acquisition is a smart move. Analyst Tim Bajarin of Creative Strategies Inc. says adding Red Hat's open source technology could make IBM more competitive.

"This is very important in a world where competition from Google, Dell, Amazon, Lenovo and others are vying to provide the technology for business transformation as mid-to-large enterprises move from current localized servers to cloud based solutions," he told Business Insider.

SEE ALSO: Google CEO Sundar Pichai explained how easy it is to unintentionally create a sexist, racist AI bot

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Google wanted you to be bored at its latest developer conference — and it worked (GOOG, GOOGL, FB)

Tue, 05/07/2019 - 6:52pm

Remember when developer conferences were for tech companies to brag about how big they were?

It's kind of the point of a developer conference. The reason that companies spend so much time and money putting on a show is to make the case that they've got the biggest, baddest platform on the block; the one that software developers had better swear fealty to if they want to succeed in the business.

That was before the Big Tech backlash. Before Donald Trump's drive-by tweet attacks. And before Facebook was setting aside $3 billion to pay government fines for violating user privacy.

Just how dramatically the times have changed was on full display Tuesday at Google's I/O developers conference — a splashy event that the company once kicked off by having a Google founder jump out of a plane.

There was no skydiving kicking off Google's 2019 conference.

But there also wasn't something else: no bragging about size.

Compare this to a couple of years ago. This is Google CEO Sundar Pichai's keynote during the 2017 I/O event:

"Every single day users watch over 1 billion hours of video on YouTube," Pichai boasted back in 2017. "Every single day users navigate over 1 billion kilometers on Google maps." 

Google's unstoppable growth was not just a key talking point, it was the underlying theme of the event just two years ago. New products, like Google Drive, were booming, he showed:

For the past two years, however, Pichai has kept the bar charts and eye-popping numbers out of his opening presentation. On Tuesday, when Pichai delivered his keynote, he didn't mention user numbers for any Google products.

The closest thing to cross Pichai's lips that even hinted at Google's size was this altruism:  

"We feel so privileged to be developing products for billions of users. And with that scale comes a deep sense of responsibility to create things that improve people's lives."

The latest update about the number of people using Google's Android software (there are now 2.5 billion of them) was announced one hour into the event, when a Google product director was giving an overview of the new Android features.

It was, in other words, a very different kind of I/O. The chest-thumping and braggadocio were on the backburner, and the skydiving Sergeys of yore were nowhere to be seen.

This isn't to defend the circus-like spectacle of some of the past events, or to say that Google didn't have show off any cool technology at this year's event (the update to Google Lens and the live text capture features were very cool).

But does anybody really think Google has fundamentally changed, or that it doesn't care about how big and dominant its products are? 

Google is still a profit-driven, advertising-supported business that feeds its bottom line with users and their data. And it's a fierce competitor that's never shied away from using its heft to conquer new markets and crush its rivals.

Sure, Google's proclamations that it intends to be more responsible about privacy, AI ethics and "digital well being" are to be commended. But its attempt to play down its power is nothing more than showmanship, and it's a much less interesting show to watch.

SEE ALSO: The most important announcements Google made at its biggest conference of the year

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8 incredible facts about the booming US marijuana industry

Tue, 05/07/2019 - 6:19pm

  • The US marijuana industry is worth billions of dollars, and is showing no signs of slowing down.
  • Ten US states have legalized recreational marijuana use, and 33 have legalized medicinal use.
  • Read on for eight surprising facts about the marijuana industry.
  • Visit MarketsInsider.com for more stories.

The marijuana industry is booming in the United States.

From the $52 billion in sales the industry posted to the 76% increase in cannabis jobs this year, there are plenty of statistics to show marijuana's startling contributions to the US economy.

Marijuana initiatives have swept through state legislatures in recent years. Recreational marijuana use is legal in 10 US states, while medicinal marijuana is legal in 33. Illinois became the most recent state to weigh the topic when Gov. JB Pritzker introduced a bill to legalize the drug on Saturday.

Now, the industry is showing no signs of slowing down.

Read on for eight interesting facts about the US marijuana industry:

The marijuana industry could soon be worth more than the GDP of 9 US states

Marijuana Business Factbook estimates the legal-marijuana industry's economic impact in the US was between $20 billion and $23 billion in 2017. It estimates the economic impact could reach as high as $77 billion by 2022.

Those numbers are comparable to the GDPs of Idaho and West Virginia, which were both a tick over $77 billion in 2018, according to the Bureau of Economic Analysis. And it's worth more than the GDP of nine states, including Delaware, Alaska, and both North and South Dakota.



Cannabis employs five times as many Americans as coal

New Frontier Data, a cannabis market-research and data-analysis firm, estimates that the US cannabis industry employs at least 250,000 people. And those are just the jobs that are directly involved with handling marijuana plants — others in the industry are harder to quantify, a New Frontier economist told the Associated Press.

Compare that to the size of one of the staple blue-collar industries, coal mining, which employed 52,300 in 2018.

Another study estimated the marijuana industry would grow to at least 330,000 jobs by 2022, a higher number than the 268,000 employees at US steel and iron mills.



The median marijuana salary is 10% higher than the US median salary

The median salary in the marijuana industry salary was $58,511 in 2018, while the median salary for US workers as a whole was $52,863, according to Glassdoor data. That's a difference of 10.7%.



See the rest of the story at Business Insider

Lyft says 2019 will be its 'peak loss' year (LYFT)

Tue, 05/07/2019 - 5:50pm

Lyft expects 2019 to be its worst year in terms of financial losses, the ride-hailing company's CFO told Wall Street analysts on Tuesday.

"We anticipate 2019 will be our peak loss year as we then move steadily towards profitably on a consolidated basis," CFO Brian Roberts said on the company's first quarter earnings conference call in response to a question about Lyft's path to profitability.

For the first three months of 2019, Lyft's net loss came in at $211.5 million, the company said. Revenues, meanwhile, rose to $776 million where Wall Street analysts polled by Bloomberg had expected $738.5 million.

"We are definitely encouraged by the strength of our core business and see a clear path to profitably in core ride sharing," Roberts continued.

Shares of Lyft rose about 3% in after-hours trading after the peak loss comment. The stock originally popped, then fell into the red, after the earnings report.

"Our initial reaction to 1Q results is positive, but detail was sparse," Jake Fuller, an analyst at Raymond James, said in a note to clients Tuesday evening. "A moderation in competition is critical to the bull case and results appear to show that, with sequential monetization and margin improvements."

SEE ALSO: Lyft is whipping around after delivering earnings for the first time as a public company

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An experienced CEO says there's one question all managers should ask themselves every day — especially when things go wrong

Tue, 05/07/2019 - 5:17pm

  • Nick Mehta is the CEO of Gainsight, a customer success software company with more than 600 employees.
  • In this op-ed, he says that if you're a manager, a leader, or especially a CEO, there's a fundamental question you need to ask yourself: Are you giving your team everything they need to succeed?
  • Rather than making excuses for why things don't work, leaders should embrace 'servant leadership' and work to empower their teams from the bottom up.
  • To do that, listen more than you speak, and remind your team members often about their purpose.
  • Visit Business Insider's homepage for more stories.

Have you heard of the Red Eye Coefficient? It's the value that shows the relationship between the speed of a company's growth and the number of red-eye flights the CEO must take. As the CEO of a fast-growth company, I've banked some serious air miles while most of the country has been sleeping.

I simultaneously dread red-eye flights and revel in them. They can be exhausting and brutal, but they've also led to some of the most profound moments of my life. There's something about being at the end of your mental and physical rope and being all alone with your laptop that can bring out the inspiration in you. I wanted to share one red-eye realization I recently had that speaks to a big problem I see with CEOs and leaders.

As I leaned on the cold window of seat 9F trying to sleep, I ended up in a recursive loop of memories of all times I was told to act more "businesslike," to be "less emotional," and to "show more poise." I know I'm not the only one. Since probably forever (or at least the Industrial Revolution), people have been told to leave their emotions at the door when there's a job to do. That the biggest barrier to their success is their feelings. Never let them see you sweat. Don't show any sign of vulnerability, or people will pounce on it. The only thing that matters is the company's bottom line. And all too often we hear "it's not personal, it's business" when it comes to making hard decisions. CEOs speak with lay-off euphemisms like "cutting the fat" and "tightening our belts" to morally justify firings as "better for the long run."

Read more: Pinterest's 2nd employee ever explains why becoming an early startup employee is a 'terrible' idea if you want to get rich

The big question

But if you're a manager, a leader, or especially a CEO, there's a question you need to ask yourself. It's fundamentally a question about what it means to lead, and I'd love for you to answer as objectively as you can: Are you giving your team everything they need to succeed?

The role of a leader isn't to tell people what to do, it's to give them the resources they need to thrive. Unfortunately, when things don't go right, too many leaders look everywhere but the mirror for where to place blame.

Rather than making excuses for why things don't work or why hard decisions must be made, leaders should embrace servant leadership, working to empower their teams from the bottom up as opposed to driving them.

But what does this mean practically? What are you actually supposed to do? There are four prongs to a servant leadership approach that you can start doing today:

1. Be the change you want to see in others

I have a really hard time expecting of others what I don't of myself. If I want people to admit mistakes, I need to as well. If I want people to learn, I need to model that behavior. To give me a routine around this, I send a detailed email to the entire company every week sharing what I learned in the last week. I try to share publicly mistakes that I've made any time I get a chance.

2. Appreciate those who are setting the example

It's not just about me. I've learned to try to encourage other leaders to be vulnerable in their presentations and communications and then I always try to reinforce the behavior by commending them on their openness. At this point, each manager at Gainsight has a unique way of showing their true self.

Read more: The 11 words a manager can say to drastically improve an employee's professional life aren't used nearly enough, says a 30-year tech exec

3. Remind your team of their purpose

We tend to (mistakenly) believe the reason we come to work every day is a paycheck. But if you've read Daniel Pink's book "Drive," you'll know that people are much more motivated by Mastery, Autonomy, and Purpose. A lot of companies have programmatic approaches to driving Mastery and Autonomy, but not Purpose. I take every opportunity to infuse our company purpose into our strategy as well as into everyday conversations. If you're not already doing this, in every communication you should remind everyone, from your employees to your customers, of their purpose.

4. Listen

This is such an old adage that it's cliché. But I love the adage, "Listen to understand, not to respond." So when I meet with teammates to get feedback, I try to ready myself to soak it in and be gracious versus coming back with a debate or even with a solution. I also think powerful questions can help spur discussion. I ask new teammates "what's better about Gainsight than advertised? What's harder than advertised?"

Does being a human-first leader mean you don't make tough decisions? Of course not. From time to time, you're going to have to do things that don't feel great. As a CEO, sometimes even small decisions can have a huge impact (good or bad) on real human beings. But I ask myself this all the time: Am I causing pain for others in the interest of a "rational" decision? If I am, I better be feeling that pain myself many times over — or I've lost my humanity. That pain is a precious signal, reminding us to keep humans first in our decision calculus.

 

 

 

SEE ALSO: Richard Branson on the 'million-dollar lesson they don’t teach in business school' — plus 12 more secrets from highly successful people

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Lyft is partnering with Waymo to launch robo-taxis in Arizona (LYFT, GOOGL)

Tue, 05/07/2019 - 4:38pm

  • Waymo's self-driving cars will soon be available to Lyft customers in Phoenix, Arizona, the company said Tuesday. 
  • The cars are fully autonomous, according to Waymo, but they'll still employ safety drivers to take over if there are any hiccups during rides. 
  • The announcement was made in conjunction with Lyft's first quarter earnings report. 

Lyft is deploying ten of Waymo's autonomous robo-taxis on its platform in the Phoenix area, the company announced Tuesday in conjunction with its first quarter earnings release.

The partnership comes four months after Waymo, the Alphabet subsidiary, launched Waymo One, its first commercial ride-hailing product in the Arizona city. The cars are fully autonomous, the company says, but still employ safety drivers to take over if there are any hiccups during rides.

In the next few months, Lyft customers will be able to select a Waymo vehicle directly in the app, Waymo's chief executive said in a Medium post announcing the news.

"This first step in our partnership will allow us to introduce the Waymo Driver to Lyft users, enabling them to take what for many will be their first ride in a self-driving vehicle," Waymo CEO John Krafcik said in the post.

"We're committed to continuously improving our customer experience, and our partnership with Lyft will also give our teams the opportunity to collect valuable feedback."

Now read:

SEE ALSO: Waymo One passengers reveal what it's really like to ride in Alphabet's self-driving taxis

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NOW WATCH: Why top automakers spend millions on concept cars they don't plan on making

Lyft is whipping around after delivering earnings for the first time as a public company (LYFT)

Tue, 05/07/2019 - 4:37pm

  • Lyft shares fell by as much as 4.4% late Tuesday after the ride-hailing company reported earnings for the first time as a public company.
  • Lyft's first-quarter revenue and revenue outlook both topped analysts' expectations.
  • Its adjusted net loss narrowed from a year ago.
  • The report comes days before rival Uber is expected to debut on the public market.
  • Watch Lyft trade live.

Lyft shares traded in a volatile fashion late Tuesday, falling by as much as 4.4% before recouping those losses, after the ride-hailing company delivered its first quarterly report as a public company. Both Lyft's revenue and its revenue outlook topped analysts' forecasts.

Lyft's adjusted net loss for the quarter came in at $211.5 million, compared with an adjusted net loss of $228.4 million a year ago. Analysts were keeping a close eye on what kind of losses Lyft would register as its lack of profitability has been a core concern.

Two of the company's closely watched metrics, active riders and revenue per active rider, showed robust growth. The number of active riders rose by 46% to 20.5 million as revenue per active ride jumped 34% to $37.86.

The report contained some "encouraging signs," but was light on detail, said Jake Fuller, an analyst at Guggenheim.

"With LYFT topping expectations across the board on core revenue drivers and margins, we do not see signs of competitive pressure," he wrote.

Here's what Lyft reported, compared with what analysts polled by Bloomberg forecast:

  • Adjusted net loss per share: $9.02 versus a loss of between $7.93 and $14.14 expected.
  • Revenue: $776.0 million versus $738.5 million expected.
  • Second-quarter 2019 adjusted EBITDA guidance: A loss of $270 million to $280 million versus a loss of $320.41 million expected.
  • Second-quarter 2019 revenue guidance: $800 million to $810 million versus $782.15 million expected. 

The report comes after Lyft's brutal first six weeks on the stock market. 

To place Lyft's performance in perspective, consider its first month of trading relative to other large initial public offerings in the US. Its 20.5% decline was the second-worst on record, only better than Facebook's 21% drop seven years ago, according to Dealogic.

Analysts attribute the drop to a few things. Wall Street is concerned over Lyft's uncertain path to profitability (it lost $911 million last year) and competition from rival Uber, which is expected to price its IPO later this week. 

Wall Street was looking for a few key metrics like active riders, total rides, take rates, and bookings. Another important metric is revenue per active rider, which comes from dividing quarterly revenue by active riders for that quarter.

That's important because analysts expect that measure's growth will flatline in the coming years. 

Gross bookings growth is also expected to slow, according to UBS analysts' projections. 

To be fair, the majority of analysts are bullish. Of those polled by Bloomberg, 15 say "buy," eight rec commend "hold," and two suggest "sell." 

Raymond James analyst Justin Patterson, who has a price target of $85 — 45% above where shares are currently trading — prior to the report said he expected user growth and frequency to "remain healthy," and believes the company has room to grow in both the US and Canada.

"Net, we continue to expect LYFT to trade on 1) positive revisions to revenue and gross profit and 2) modest multiple expansion from investors becoming comfortable with TAM and competition," he said.

Tuesday's earnings report comes as Uber and Lyft drivers prepare for strikes this week to protest pay and working conditions. The consternation comes down to a metric known as the take rate, which is the percentage of a driver's fare that the ride-hailing company keeps.

Lyft shares were volatile in Tuesday's regular session, rallying by as much as 1.7% and falling by as much 4.2%. 

Read more Lyft coverage from Markets Insider and Business Insider:

Uber and Lyft drivers are planning to strike this week, and it highlights the challenge the 2 ride-hailing giants face as public companies

Lyft went public at a $24 billion valuation. Here's how that compares to other high-profile tech companies dating back to the dotcom bubble.

Uber and Lyft drivers are planning a massive strike this week over work conditions and pay rates

15 cities where Uber and Lyft drivers make the most money

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Stocks plunge as trade-war worries rattle investors

Tue, 05/07/2019 - 4:01pm

  • US equity markets dropped sharply on Tuesday as traders prepared for an escalation of the US-China trade war.
  • Shares fell in companies with strong links to China such as AMD, Nvidia, L Brands, and Arista Networks.
  • Trump "may well be making a deal seem further away in order to make the achievement seem all the more impressive when it comes," an analyst said.

After months of calm in markets, fears about an escalation of the US-China trade war roared back this week as President Donald Trump's tweets about tariffs on China sent investors into a sell-off frenzy.

World equity and oil markets slumped Tuesday and the stock market's "fear gauge," known as the VIX, spiked after the US president on Monday threatened to raise tariffs on $200 billion worth of Chinese goods to 25% from 10% and slap new 25% tariffs on $325 billion worth of Chinese goods.

Two of the stocks caught in the crossfire were AMD and Nvidia. Both stocks fell by about 3%, as China is an important gaming market for the chipmakers. Shares in L Brands also slid 5% — the owner of Victoria's Secret and PINK described China as "an extremely important market" in April. Similarly, Aristan Network fell 4% as the cloud-networking group flagged that US tariffs on Chinese imports could increase its costs and reduce its sales in its latest earnings report.

On Monday, US Trade Representative Robert Lighthizer confirmed Trump's threat from a day earlier, saying the tariff increase was set to take effect Friday at 12:01 a.m. ET.

Investors are now pondering what economic damage might result after a months-long truce in the conflict.

"One cannot but sense that Mr. Trump is playing us a little," said Neil Wilson, the chief market analyst for Markets.com. "He may well be making a deal seem further away in order to make the achievement seem all the more impressive when it comes."

Here's the market roundup as of 4 p.m. ET:

  • The Dow Jones Industrial Average closed down almost 500 points or 1.9%, the S&P 500 shed 48 points or 1.6%, and the Nasdaq fell 153 points or 2%.
  • European stocks were broadly lower, with Britain's FTSE 100 down 1.7%. The Euro Stoxx 50 was lost 1.8%, while Germany's DAX and France's CAC 40 were both weaker 1.6%.
  • Asian indexes regained ground after heavy losses Monday. The Shanghai Composite closed up 0.7%, and Hong Kong's Hang Seng gained 0.5%. Japan's Nikkei, which reopened after Golden Week, shed 1.6%.
  • Oil prices trended lower as both Brent and West Texas Intermediate crude slid by about 1.5%.

"Over the course of the last week or so we have seen ... an erosion in commitments by China," Lighthizer told reporters, according to Reuters. "That in our view is unacceptable."

"We're not breaking off talks at this point," he added, saying, however, that for now, "come Friday there will be tariffs in place."

Markets eased off lows after China confirmed that its top negotiator, Vice Premier Liu He, would travel to the US this week to continue trade talks, according to Bloomberg.

"What has become clear is that there is still a lot of work to be done before a trade deal between the world's two largest economies is achieved," said Jasper Lawler, the head of research at London Capital Group.

"That doesn't mean it's impossible, just that it could take longer than the two sides were initially letting on and the market was pricing in," he added.

"Amid such highly sensitive market conditions, volatility is expected to be the order of the day," said Han Tan, a market analyst at FXTM. Another batch of tariffs, he said, could "trigger another selloff in riskier assets, as investors try and anticipate what higher barriers to trade may do for the already moderating global growth outlook."

SEE ALSO: Automakers face 'material and negative ramifications' over the escalating US-China trade war (F, GM)

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Google is building parental controls into Android that will let you limit how much time your kids spend on each app (GOOGL, GOOG)

Tue, 05/07/2019 - 3:53pm

  • Google is adding parental control features to Android, the company announced at its I/O developer conference Tuesday.
  • The company previously offered such features as a standalone app called Family Link.
  • Android Q, the next version of the operating system, will ship with the Family Link features built into its settings app.
  • Google will also add a new feature that will allow parents to set limits on their kids' use of particular apps.
  • Visit Business Insider's homepage for more stories.  

Google is building parental controls directly into the next version of its Android operating system.

The company plans to take Family Link, a standalone app it launched two years ago to help parents manage their kids' phone use, and incorporate it into the settings function of Android Q, the next iteration of the operating system, Stephanie Cuthbertson, Google's senior director of Android, said Tuesday. Instead of having to download the app through the Google Play store, users will be able to go into their device's settings and set limits on their kids' phone activity or review apps they want to install.

"For 84% of us parents, technology use by our kids is a top concern," Cuthbertson said as she made the announcement at the company's annual I/O developer conference in Mountain View, California.

Read this: Everything Google announced at its biggest conference of the year

Consumers could previously use the Family Link app on both Android phones and Apple iPhones to set limits for kids using Android devices. Through the app, parents could monitor how much time their children were on their phones, designate a bedtime when they could no longer use their device each day, and approve or block apps they want to install. They'll be able to do those same things in Q, but without having to download a separate app.

But even as it's adding Family Link into Android, Google is adding some new features to it. Parents will be able to set time limits on their kids' use of specific apps, such as Snapchat or Instagram. And they'll be able to tap a button to grant their kids a few minutes of "bonus time," if they've reached their limits.

Both Google and Apple have been increasingly focusing on such well-being features in the wake of criticism from researchers and advocates, including former Google engineer Tristan Harris. Harris in particular has chided tech companies for trying to extract more and more attention from consumers.

Got a tip about Google or another tech company? Contact this reporter via email at twolverton@businessinsider.com, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.

SEE ALSO: Google is 'absolutely' thinking about foldable phones, the company's Pixel chief says

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Wingstop beats as same-store sales surge (WING)

Tue, 05/07/2019 - 3:44pm

  • Wingstop Restaurants shares were up 2% after the company posted stronger-than-expected first-quarter adjusted earnings and same-store sales growth.
  • Wingstop has focused on a series of cost initiatives to improve results.
  • Watch Wingstop Restaurants trade live.

Chicken wing purveyor Wingstop Restaurants reported earnings after the bell on Tuesday, beating consensus for adjusted earnings and same-store sales growth.

Wingstop's first-quarter adjusted earnings were $0.22, coming in above the $0.19 that analysts surveyed by Bloomberg were expecting. Revenue of $48.1 million topped the $45.8 million that analysts were anticipating and same-store sales growth of 7.1% easily outpaced the 3.7% expectation.

"Our strong performance during the first quarter demonstrates the value that our strategic initiatives, including our national advertising campaigns, increased digital and online ordering capabilities, and systematic rollout of delivery across our domestic markets, bring to our restaurants," said Charlie Morrison, chairman and CEO of Wingstop.

"We are building our business for the long-term, and while we are pleased with the operational and financial performance in the first quarter, we are focused on our vision of becoming a top ten global restaurant brand.

As labor costs continue to rise, Wingstop is also shifting towards ordering kiosks and lockers where customers can pick up orders. "Because our business is 75% carryout, our customers prefer to come in, skip that line, get their food, and get out," Morrison said.

The company operates over 1,200 restaurants globally.

Wingstop was up 18% this year through Tuesday's closing bell.

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Here's what happened on the fiery emergency landing in Russia that killed 41 people

Tue, 05/07/2019 - 1:38am

  • Aeroflot Flight SU1492 made an emergency landing at Moscow's Sheremetyevo International Airport on Sunday.
  • Of the 78 passengers and crew on board the Sukhoi SuperJet 100, the violent landing and subsequent fire took the lives of 41 people.
  • Dramatic video of the landing quickly spread across the internet showing the plane bouncing violently down the runway, followed by images of flames and thick black smoke billowing from the jet.
  • Visit Business Insider's homepage for more stories.

Aeroflot Flight SU1492 made an emergency landing at Moscow's Sheremetyevo International Airport on Sunday. Of the 78 passengers and crew on board the Sukhoi SuperJet 100, the violent landing and subsequent fire took the lives of 41 people.

"Aeroflot extends its deepest condolences to the family and loved ones of those who lost their lives on flight SU1492 Moscow-Murmansk," the airline said in a statement. "The crew did everything in its power to save passenger lives and provide emergency assistance to those involved. Tragically, they were unable to save all of those aboard."

"Our thoughts and hearts are with those who have suffered an unspeakable loss. We mourn with you," Aeroflot added.

The SuperJet is a Russian-made regional jet that first entered service in 2011. According to Airfleets.net, Aeroflot has 50 of the planes in its fleet, each with room for 87 passengers. The aircraft used to operate Flight SU1492, registration number RA-89098, was delivered to Russia's national airline in September 2017.

Read more: Harrowing video shows rough landing that may have caused the deadly fire on a Russian airliner.

According to the airline, Flight SU1492, en route from Moscow to the city of Murmansk in northwestern Russia, suffered "malfunctions on board the aircraft" shortly after takeoff. As a result, the crew declared an emergency and returned to the airport. Later, one of the plane's pilots told Russian media that the Sukhoi Superjet 100's communications systems failed due to a lightning strike.

Dramatic video of the landing quickly spread across the internet. The first video to be posted shows the plane coming to a stop on the runway with flames and thick black smoke billowing from the rear of its fuselage. A second video soon emerged showing the plane bouncing violently down the runway when its main landing gear appears to collapse and catches fire.

Here's how Aeroflot Flight SU1492 unfolded:

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Aeroflot Flight SU1492 is a daily scheduled flight from Moscow to the city of Murmansk inside the Arctic Circle. On Sunday, May 5, the flight was operated by a Sukhoi SuperJet 100, registration number RA-89098.

Aeroflot Flight 1492 took off from Moscow's Sheremetyevo International Airport on Sunday at 6:03 p.m. local time.

Five minutes into the flight, the SuperJet has turned north toward Murmansk and climbed to an altitude of 10,500 feet. It's unclear when the communications failure caused by lightning occurred. However, it's most likely to have happened before this point.

See the rest of the story at Business Insider


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