—— More US Mortgages Go Underwater; $3B PE-owned Companies Await Exit; Airbnb Drops 8.5%; US Jobless Claims Jumps by 22,000; Warner Bros Posts Disappointing Earnings; Manhattan Rent Could Break Historical High; Ex-NBA Player Sentenced to 40 Months
1. More US Mortgages Go Underwater
As of the first few months of 2024, approximately one in 37 homes in the US are significantly underwater, with this issue being more prevalent in many southern states, recent data reveals.
Nationwide, 2.7% of homes have mortgage balances that exceed their market value by at least 25%, an increase from 2.6% in the last quarter, according to ATTOM’s first-quarter 2024 US Home Equity & Underwater Report.
Although the percentage of such homes is on the rise, it is still substantially lower than the pre-pandemic rates, which were more than double the current figures.
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2. $3B PE-owned Companies Await Exit
After two stagnant years, the market for initial public offerings (IPOs) is showing signs of revival, bringing returns to investors who have been eagerly awaiting their financial rewards.
However, the recovery hasn’t been swift enough. Behind the scenes, private equity firms burdened with large portfolios, along with banks and exchanges that profit from assisting companies in going public, are still rushing to develop alternative exit strategies.
To adapt, some are opting for private share sales, while others are creating new semi-public trading platforms to attract companies. At least one private equity firm is considering a revision of traditional investment models to better align with the changing landscape.
The reasons for this slow recovery in the IPO market include projections that a robust resurgence might not materialize until next year, and a record $3.2 trillion was locked in aging, privately held companies at the close of 2023, according to data from Preqin.
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3. Airbnb Drops 8.5%
Airbnb Inc.’s shares were poised for their largest decline in a year after the company provided disappointing guidance for the second consecutive quarter, signaling a potential slowdown in travel spending as the peak summer season approaches.
The company projected revenue for the quarter ending in June to be between $2.68 billion and $2.74 billion, as mentioned in a shareholder letter on Wednesday. This forecast fell short of analysts’ expectations, which were pegged at $2.74 billion. Airbnb attributed the subdued outlook to the early occurrence of Easter in 2024 and currency fluctuations.
Airbnb and its competitors have been trying to stabilize their operations post-Covid-19 pandemic. The recovery across the travel industry has been uneven, with varying speeds of demand growth in different regions influenced by the disparate timelines of lifting lockdown restrictions. Just last week, Booking Holdings Inc. also provided a gloomier than anticipated forecast, and Expedia Group Inc. reported disappointing results.
The stock dropped 8.5% in premarket trading and could mark its most significant decline since May 10, 2023, if the downward trend persists.
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4. US Jobless Claims Jumps by 22,000
Last week, initial applications for US unemployment benefits surged to their highest level since August, aligning with a break period for New York City public schools.
The number of initial claims rose by 22,000 to 231,000 for the week ending May 4, as reported by the Labor Department on Thursday. This increase exceeded the median prediction of 212,000 forecasted by economists in a Bloomberg survey.
It’s noted that public school employees in New York City, including bus drivers, are eligible to claim unemployment benefits during winter and spring breaks, which typically results in higher weekly claims figures.
Prior to this recent spike, the total number of first-time US unemployment applications had consistently ranged between 200,000 and 222,000 over the past three months.
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5. Warner Bros Posts Disappointing Earnings
Warner Bros. Discovery Inc. reported lower-than-expected sales and profit, as the entertainment heavyweight faced challenges including reduced TV advertising sales and disappointing video game performances.
In the first quarter, the company, which owns CNN, TNT, and other cable networks, posted sales of $9.96 billion. This figure not only fell short of Wall Street’s average estimate of $10.3 billion but also represented a 7% decrease from the previous year.
Additionally, adjusted earnings before interest, taxes, depreciation, and amortization stood at $2.1 billion, missing the market forecast of $2.18 billion and marking a 20% decline from the prior year.
The earnings shortfall reported by Warner Bros. Discovery Inc. was partly attributed to the underwhelming performance of the video game “Suicide Squad: Kill the Justice League,” which generated significantly lower revenue than expected in the quarter.
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6. Manhattan Rent Could Break Historical High
Apartment rents in Manhattan reached a new record high for April, suggesting the potential for another summer of unprecedented rent increases.
According to appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate, the median rent for new leases signed last month was $4,250, a $9 increase from the previous April.
This marks the third increase in the past four months. With landlords raising prices and vacancies remaining near historic lows, prospective tenants are finding themselves with little choice but to accept higher rents. As warmer weather approaches, competition for apartments is expected to become even more fierce.
Jonathan Miller, president of Miller Samuel, commented on the trend, saying, “Based on where we are now, it seems like [we’re going to beat last summer’s all-time highs].”
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7. Ex-NBA Player Sentenced to 40 Months
Former National Basketball Association player Glen “Big Baby” Davis was sentenced to over three years in prison for his role in a scheme to defraud the NBA’s health care plan of millions of dollars.
Davis received a 40-month prison sentence from U.S. District Judge Valerie Caproni in Manhattan on Thursday. As a former player for the Boston Celtics, Davis was one of the most prominent figures involved in the scandal, which included more than a dozen other former players. The group was accused of submitting false claims for medical and dental procedures that were never performed.
In November, a jury found Davis and another ex-player, William Bynum, guilty. Last month, Bynum was sentenced to 18 months in prison.
Glen “Big Baby” Davis won a championship with the Boston Celtics in 2008 and played for several other teams throughout his NBA career.
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The content of this article comes from various financial news media such as The Wall Street Journal, Financial Times, and Bloomberg.