Author Archives | Jim OBrien

Groupon Stock Fall: Unexpected or Unavoidable

Groupon Stock FallsIn a move unexpected by experts, and unusual for Internet base IPOs; Groupon (GRPN on NASDAQ) fell below its initial price after only 21 days of trading. The Chicago based company, which acts as a local e-commerce marketplace connecting consumers with discounts thorough daily emails, began trading on November 7th, 2011 at more than $25.00 per share. At the close of business on November 28th, the stock was trading at less than $15.25 per share.
The stock was able to maintain its value for several trading days after the initial offering but began to show signs of instability as early as November 14, when CNBC reported it had been given a “sell” rating by Northcoast. Despite the poor rating, Groupon continued to maintain its value until November, 22 when it first dipped below the initial offering price of twenty dollars per share. Any thought of a rebound was squashed following a Wall Street Journal article on November 25 indicating that the company had failed to show any long term profitability. Despite the negative outlook imposed upon the company, several trading experts have listed them as a stock to “watch”.
The recent fall is concerning for Groupon as it struggles to hold onto a market valuation of approximately $10 billion. This comes shortly after the company rejected a $6 billion dollar buyout offer from Google prior to the IPO. Analysts have cited strong competition from sites like Living Social, which recently expanded its offerings to include gift cards, while Groupon maintained its model. As of 3 PM today, the stock had rebounded up 0.87% and was trading just over $16.00 per share.

Posted in Featured News, Finance

Amazon Wants California Voters to Decide on Tax Collection Law Inc., a multinational electronic commerce company, appeals before the California voters to abolish a new law that oblige online sellers to collect sales taxes on purchases made online throughout the state.

On Friday, a referendum petition was filed with the office of state Attorney General so that the state’s registered voters can decide on the given condition, which was part of a law signed in late June.

The new law, which entails online retailers to collect sales taxes from related companies in California, extends the definition of physical presence in the state. Tax collection is now incorporated in companies and individuals that earn commissions through visitor referrals from their websites to the online retailer’s site like Amazon. These companies include marketing and product-development division, as well as company affiliates.

The passage of this law is just one of the actions that states have made to extend the definition of physical presence. In 2009, a similar law was submitted by the legislature; however, Gov. Arnold Schwarzenegger rejected it.

Several states have been trying get around the 1992 U.S. Supreme Court ruling that restricts them to compel businesses to collect sales taxes apart from those with a physical presence, e.g. store, in the state. A supplementary $200 million in tax revenue is expected every year once the law is pushed through.

Amazon needs to gather round more than 500,000 signatures by the end of September to bring the decision before the residents of California through a statewide vote February next year.

Posted in Finance

Bank of America Pays $8.5 Billion Mortgage Settlement

Bank of America has agreed to pay $8.5 billion to resolve claims that the financial and insurance company sold mortgage-backed securities that are of low-quality before the collapse of the housing market.

The deal came after a group of investors insisted that the North Carolina-based company repurchase $47 billion worth of mortgages that the Countrywide unit sold in bonds. The agreement between parties was announced Wednesday morning.

The investors argued that Countrywide, which was bought by Bank of America for $4 billion in 2008, expanded itself at the investor’s price by servicing bad loans and continuing servicing fees. Bank of America has denied such allegations.

The mortgage settlement would reduce future uncertainty in the banking industry and resolve the issues caused by their acquisition of Countrywide, said Brian Moynihan, chief executive officer of Bank of America, on Wednesday.

The settlement, which covers 530 trusts with $424 billion principal balance, is subject to the approval of the court.

According to Keith Horowitz, a Citi analyst, the settlement that is equivalent to only 2% of the original principal balance, eliminates one of the biggest risks of investors for Bank of America.

Also, the settlement puts Bank of America to a second-quarter loss between $8.6 billion and $9.1 billion. The bank is expected to release a quarterly loss between $3.2 billion and $3.7 billion, not including the settlement and other charges.

The Bank of America Corp had a 4 percent increase in shares to $11.30 before the market opened. The investors are glad that the bank can place huge uncertainty behind it.

Posted in Finance

U.S. Mortgage Applications Slightly Dropped in Early June

Applications for home loans decreased last week, but the demand for refinancing increased as interest rates bordered down, a financial group said on Wednesday.

The seasonally adjusted Purchase Index for mortgage application activity, including the demand for home purchase and refinancing, dropped 0.4% in the week that ended June 3, according to the Weekly Mortgage Applications Survey carried by the Mortgage Bankers Association. The results shown include the adjustment made for the Memorial Day holiday. The Purchase Index dropped 11% from last week on an unadjusted basis.

Meanwhile, the unadjusted Purchase Index dropped 15.2% farther from the previous week. It showed that the unadjusted Purchase Index was up 9.0% than the same week a year ago.

The refinancing applications, which were adjusted seasonally, increased 1.3%, but the measure of loan requests for home purchases decreased 4.4%. The MBA said the refinance share of loan activity rose to 67.3% of the entire applications from 65.7% a week earlier. According to the industry group, that is the highest share since January 28 this year. The adjustable-rate mortgage share activity declined to 6.1% from 6.2% of the entire applications from last week.

The average 30-year contract interest rate for fixed-rate mortgages dropped 4.54% from 4.58% percent. Since November 2010, the current figure shown is the lowest 30-year contract rate. From the previous week, the effective rate declined as well.

For fixed-rate mortgages, the average 15-year contract interest rate dropped 3.67% from 3.78%. Since October 2010, the recent 15-year contract rate is also the lowest rate recorded.


Posted in Finance

Former Hospital Executive Accused of Stealing

The former vice president of the Children’s Hospital of Philadelphia is now accused of stealing $1.7 million from the esteemed facility, authorities announced Thursday.

The United States Attorney’s office said that Roosevelt Hairston, Jr. effectively hid the theft from CHOP by coming up shell companies, opened bank accounts under their names, and established deceptive offices for them.

One of the prosecutors said that 55-year old Hairston used the money to support her luxurious lifestyle. He has high-end cars, a yacht and a captain to maintain it, and a real estate, among many other luxury items. The prosecutors added that the fraud begun on 1999 and continued until he was caught earlier this year.

On top of these charges, he is also accused of identity theft and deliberate lying to his co-workers and staff. Moreover, the government also charged him for failing to report income to the Internal Revenue Service.

Howard Bruce Klein, Hairston’s lawyer, said that Hairston made a lot of huge mistakes in his life and he admits to some financial irregularities. He, however, insists that there is another side to him. Klein added that Hairston works with the hungry and homeless thru his public interest law center. He also mentored many students. Klein said that he is hoping that those kind actions will be taken in to consideration as the trial proceeds.

Posted in Business

May Auto Sales Took a Dip

Auto sales took a huge dip in May; much lower than what analysts expected. The May auto sales are a reflection of consumers’ hesitance to purchase higher priced vehicles amidst the weakening economy.

Because the supply of cars has tightened after the Tsunami and a series of earthquakes hit Japan, a lot of companies raised their car and truck prices. Many investors and analysts have now concluded that the strategy of many motor companies, Toyota Motor Corporation and Honda Motor Company Ltd included, backfired.

Automotive makers based in the United States General Motors Company and Ford Motor Company released their sales report on Wednesday. Both companies experience their lowest sales in eight months.

Gary Bradshaw, a manager from Hodges Capital Management, said that the car companies may have increased their prices a little too early, especially because the consumers are not yet ready and are just recovering from the economic crisis.

Don Johnson, General Motors sales chief, said that car sales in general would probably be below 13 million for the next several months. However, both Ford and GM are steadfast in their forecast that the 2011 sales will be between 13 and 13.5 million annual sales.

Johnson added that a lot of people are asking if they are actually on track for their 3 million annual sales goals, and he honestly said that as of the moment, they are not. However, they remain hopeful as the end of the fiscal year comes to a close.

Posted in Featured News, Finance

Egyptian Executive Charged for Sex Abuse

The former chairman of a huge bank in Egypt faces charges of sex abuse just weeks after the former IMF chairman was arrested for similar charges. Mahmoud Abdel Salam Omar is accused of sexually harassing a maid at one of the premier hotels in Manhattan.

The police said that Omar was arrested last Monday after being accused of sexually harassing one of the chamber maids at the Pierre hotel. The hotel is situated near Central Park and the Fifth Avenue on the Upper East Side.

Based on the police report, the maid was summoned to Omar’s room to drop off tissues Sunday evening. Once inside the room, however, Omar would not let the maid go and allegedly touched her inappropriately.

The maid managed to break free from Omar and immediately told her superiors about the incident. Her superiors, however, said that it is best until Monday to report the alleged sex abuse to the hotel’s security director. The director called the police Monday morning after hearing of the assault.

Police officers searched Omar’s room and the area surrounding the hotel, but did not find him. The police left and returned to hours later, and found Omar in the hotel lobby. He was then immediately arrested.

Omar was held in prison Monday night and was later transferred to a booking facility in Manhattan Tuesday morning. The Egyptian consulate in New York made no comments on the incident.

Paul Browne, spokesperson of the NYPD, said that the complaints seem credible. He, however, refused to comment further saying that the case is still under investigation. The case is set to be arraigned within the week.

Posted in Business

U.S. Stocks Rose Slightly Higher

U.S. stocks ended an unstable session with moderately higher gains on Thursday. Upbeat earnings on technology, as well as consumer discretionary stocks outperformed the data, which showed that economy grew at a sluggish rate and unemployment rate abruptly increased.

The NASDAQ stock market posted the largest gains after NetApp Inc’s strong profits increased the stock 8.6 percent to $56.19. Meanwhile, Microsoft Corp’s shares rose 2.4 percent to $24.77 following a statement from a top investor that its chief executive should step down.

The Dow Jones industrial average rose 0.13 percent or 15.51 points to 12, 410.17. The S&P’s 500 Index climbed 0.31 percent or 4.13 points to 1,324.60. The Nasdaq Composite Index earned 0.70 percent or 19.5 points to 2,780.64.

However, consumer discretionary division performed best, aided by Tiffany & Co, which was up 8.6 percent at $76.03. The luxury seller increased its outlook after releasing its first-quarter earnings.

Coach Inc., the leather goods company famous for its luxury handbags, released 5 percent increase while clothing-line company Guess reported a 15 percent decrease in quarterly profits. But, stocks rose to 11.2 percent as earnings per share came better than estimated. The S&P consumer discretionary sector index climbed 0.8 percent.

The Goldman Sachs reduced its S&P 500 target for the end of the year from 1,500 to 1,450. It is currently the lowest target decided by the banking firm after Citigroup and UBS increased their profit estimates for S&P companies the previous week.

However, unemployment rate reportedly rose last week and remained at high levels. The gross domestic product in the United States climbed at a 1.8 percent yearly rate in the first quarter. It did not change from the last estimate and is still below the expectations of the analysts for stronger growth.

Posted in Finance

HSBC Report Shows Few Workers Save for Retirement in UK

Fewer workers are planning to save for their retirement in the United Kingdom than those living in China and Malaysia, a report by HSBC bank showed on Thursday.

British workers fail to save for their own retirement as they continue to avoid the alarming changes to pension provision in the United Kingdom.

The survey shows that despite the impending shift in the workers-to-retirees’ ratio, workers are still spending too much of their yearly income and are setting aside too little money. Thus, they are highly at risk to suffer impoverishment in the future.

HSBC bank published the report, which assessed the attitudes of the people across the world towards retirement, on Thursday. British people knew that they would possibly live longer than the other generations ahead of them. However, although they were aware that traditional pensions were expected to weaken, they still failed to save enough money for their retirement.

The total number of people aged over 65 around the world is expected to increase from 550 million today to more than 1.4 billion in 2050. Thus, financial provision in later life is an important matter to consider.

The report says that both Europe and North America are nearing a crucial stage as the first group of baby boomers approach their retirement. In Europe, the working population is set to diminish from 2012 and onwards.

However, the survey, which asked 17,000 people in 17 countries, showed that one in five UK residents planned to rely solely on state provisions (currently equal to 100 euro per week) when they reach old age, and failed to save some of their money.

Posted in Finance

Online Casino: The Future of the Casino Industry

On Tuesday, a panel of online casino executives said that the future of casino is on internet gambling regardless if it is approved in the state or federal level. In addition, a lawmaker from New Jersey predicted that there may be a ballot question in 2012 to ask his constituents whether the state Constitution should be amended to make online casinos legal.

During the East Coast Gaming Congress, the executives of several online betting organizations said that the Internet gives the casino (and gambling industry in general) a chance to grow bigger. However, they also said the possibility of a federal law allowing it is still a long shot considering the federal raids on gambling sites conducted recently.

Jan Jones of the Caesars Entertainment said that we cannot stop the internet. The government may put protection and regulate it, but the Internet will continue to exist. The president of the Online Gaming Association in the U.S., Melanie Brenner, said that there are currently at least 10 million people who play poker online.

The members of the panel forecast an $80 billion annual revenue should online casino (gambling) is legalized.

Richard Bronson, U.S. Digital Gaming chairman, said that a federal law allowing online casinos is very unlikely. He, however, added that he is thinks individual states will soon begin allowing online gambling.

New Jersey was so close to becoming the first ever state to approve of online casino within its borders. However, Governor Chris Christie vetoed the bill and voiced concerns on its legality. The people of New Jersey said that if their legislators really want to legalize online casino, they should make a move on the amendment of the state Constitution first and let the people decide.

Jones said that if we let this opportunity pass, we are letting go of a huge potential for growth in the casino industry.

Posted in Business