With office-sharing giant WeWork, teeth-straightening company SmileDirectClub and at-home fitness player Peloton all expected to go public in the coming weeks, some are looking to other 2019 initial public offerings for guidance.
Those include the outsized success of fake-meat maker Beyond Meat, but also the not-so-hot stocks of ride-hailing companies Uber and Lyft, which closed at all-time lows on Tuesday following months of weakening performance.
But Uber and Lyft's weak performance could make the upcoming offerings much more attractive for individual investors, says Kathleen Smith, chairman and co-founder of Renaissance Capital and the brain behind her firm's outperforming IPO ETF.
"I think Uber and Lyft's poor trading is going to be a big advantage to the buy side, investors," Smith said Wednesday on CNBC's "ETF Edge." "All of these companies are going to have to please a pretty nervous set of investors who already got burned in some of these large money-losing IPOs."
Uber, for one, lost the most money in the 12 months leading up to its IPO than any other IPO ever, Smith said. The second-biggest money loser in IPO history? WeWork, followed by Lyft, she said.
As a result, "it's hard not to think about Uber when you think about WeWork," Smith said. "f you look at the performance of those IPOs, they do not do well for investors. It's going to be incumbent upon WeWork, and for many reasons, to get that valuation low."
On Thursday, CNBC's David Faber reported that WeWork's valuation targets were going to be dramatically lowered from the original $47 billion private valuation, and that the company would hold off on hitting the public market next week.
Even with the risk, however, the Renaissance IPO ETF — a market-cap-weighted fund that currently counts Spotify, Roku and Eli Lilly spin-off Elanco Animal Health in its top holdings — has handily outperformed the market this year, with a 33% rally compared to the S&P 500's 19% gain.
"The beauty is that even though Uber became a top-10 holding in our product, we've had some very strong names" including Roku, the ETF's second-largest holding at a nearly 8% weighting, Smith said.
"I looked at all other ETFs, and who has the largest holding [in Roku]? It's our IPO ETF," Smith said. "The second-largest ... is less than 2% of another ETF in the market. So, we are getting exposure for investors to these very new names that are not included or underweighted in many other indices."
That's why Smith counts Renaissance's IPO ETF as the only pure play on newly public companies. A passive fund that holds the largest, most liquid new companies' stocks for two years, rebalancing quarterly and making an exception for the largest IPOs, it is, to Smith, "the only ETF in the marketplace that has pure exposure" to the IPO space.
And while Uber and Lyft's recent performances have produced some scary headlines, some see the IPO ETF as a great way to play a fundamentally healthy IPO market.
"It's absolutely been on fire," Dave Nadig, managing director of ETF.com, said in the same "ETF Edge" interview. "It really does come [down] to that consistent, accurate valuation. You want IPOs to come out and move a percent or two on the day they come out. We've seen some of those, and then people learn those stocks, they run up, they show up in Kathleen's fund and you get that kind of performance."
The IPO ETF gained less than 1% in Thursday trading.
You pay into Social Security throughout your working life and you understandably can't wait to start getting money back from the program when you're older, but too many people rush to sign up for benefits as soon as they turn 62 without considering the consequences. This might be the best move for some people, but if you expect to live into your late 80s or 90s, you're shortchanging yourself by signing up as soon as you're eligible.
When you begin claiming Social Security affects your benefits
You become eligible for Social Security at 62, but you don't have to start claiming benefits right away. In fact, during so could hurt you in the long run. The Social Security benefit formula bases your check size on your average indexed monthly earnings (AIME) during your 35 highest-earning years. But if you'd like to receive this amount, you must wait until your full retirement age (FRA) to begin claiming. This is 66 or 67 for today's workers.
Image source: Getty Images.
Every month you claim benefits before your FRA, your checks decrease. If you begin right away at 62, you'll only get 70% of your scheduled benefit if your FRA is 67 or 75% if your FRA is 66. To put that in perspective, let's consider the average Social Security benefit check, which is $1,472 per month as of July 2019. If you were entitled to this at 67 and you begin claiming benefits at 62, you'd only get $1,030 per month.
Your checks don't increase once you hit your FRA, so by starting early, you're permanently reducing the amount you receive over your lifetime. Let's return to our previous example. If you started Social Security at 62 and received $1,030 per month, that comes out to $12,360 per year. If you claimed benefits for 30 years -- which is not unreasonable, considering the Social Security Administration estimates that one in three 65-year-olds today will live past 90 -- you'd receive $370,800 over your lifetime. If you'd waited until 67 to claim benefits, you'd receive $1,472 per month, or $17,664 per year. Assuming the same life expectancy, you'd only claim benefits for 25 years in this scenario, and that adds up to $441,600. If you live even longer, the differences between the two amounts grow even more.
There's a third option we haven't discussed yet and that's delaying retirement benefits beyond your FRA. Doing so will increase your checks until you reach the maximum benefit at 70. This is 124% of your scheduled benefit per check if your FRA is 67 or 132% if your FRA is 66. If you intend to live a long life, this is probably the way to go if you want the most benefits.
How to decide the right time to start claiming Social Security
Claiming Social Security at 62 could be the right decision if you don't expect to live long, but you won't know until you estimate your lifetime benefit at different ages. Rather than working with averages like in the example above, create a my Social Security account so you can get personalized estimates of your benefits at 62, your FRA, and at 70. Estimate your life expectancy and figure high to be safe. Then, multiply your benefit estimates by the number of months you expect to receive benefits to figure out which starting age gives you the most overall.
Waiting is usually better if you think you'll have a long life, but even if you'd like to wait, you may not be able to afford to. Delaying benefits places a greater burden on you in the early years of your retirement because you must cover all of your expenses on your own. You must weigh this as well and you may have to start benefits a little earlier than you'd like to help you cover your living expenses.
Another option for couples is for the lower earner to start claiming benefits right away at 62. This enables the higher earner to delay benefits until 70 when they'll receive more per month. The lower-earning spouse will automatically be switched over to a spousal benefit at this point if it's higher than what they're entitled to based on their own work record. This works well if one spouse makes significantly more than the other. If both spouses earn about the same, it makes more sense for both to delay benefits as long as possible.
Taking Social Security benefits at 62 isn't inherently wrong, but doing so without understanding the consequences of your choice could result in you losing out on tens of thousands of dollars over your lifetime. Choose your starting age carefully so you can get the most out of Social Security and ease the strain on your personal savings.
VAUGHAN, Ont. — CannTrust Holdings Inc. is laying off about 180 people — about 20 per cent of the Ontario-based cannabis company's workforce — following repeated problems with both its product and how it has been produced.
The move is expected to result in annual cash savings of about $9 million, as well as the company recording roughly $2 million in severance costs, the pot producer said.
Most of the affected employees were in cultivation and customer service support roles.
"We have made the extremely difficult decision to restructure our workforce to reflect the current requirements of our business," said Robert Marcovitch, interim chief executive of CannTrust in a statement.
In August, the Ontario government's cannabis retailer said it would return almost $3 million worth of cannabis to the company after determining that some of the products didn't live up to the terms of its supply agreement.
The move by the province's crown corporation in charge of wholesale distribution and online pot retail was the latest setback for the cannabis producer, which continues to be under investigation by Health Canada.
In July, CannTrust disclosed the federal regulator's findings that the company was growing cannabis in unlicensed rooms in its greenhouse in Pelham, Ont.
Health Canada placed a hold on CannTrust's inventory amounting to approximately 5,200 kilograms of dried cannabis. The company also instituted a voluntary hold of approximately 7,500 kg of dried cannabis equivalent.
CannTrust later voluntarily suspended all sales and distribution of its products as a precaution while regulators investigate its Vaughan, Ont.-based manufacturing facility.
Also in August, the company said Health Canada notified CannTrust that its Vaughan facility was rated as non-compliant as well. CannTrust also in August said that the Ontario Securities Commission had opened an investigation into issues around the alleged unlicensed growing at its Pelham greenhouse.
CannTrust has noted that Health Canada has not ordered a recall on any of the company's products.
The company said it is taking steps to solve its regulatory problems.
A board committee is looking into the extent of the non-compliance and guiding efforts to fix it. Both its chief executive officer and board chair have been replaced.
Shipments of all cannabis products have been stopped and the company said it is developing a plan to comply with Health Canada requirements.
Other provinces have said they'll wait for the results of Health Canada's review before returning any of the company's product.
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Many younger workers put off saving for retirement so they can focus on goals like paying off their student debt or buying a home. But if you've reached your 50s and have no money at all in a dedicated retirement savings plan, consider it a wake-up call to start doing better. Here are three critical moves to make if that's the situation you're in.
1. Cut back on living expenses big time
If you're without retirement savings, chances are it's because you're in the habit of spending your entire paycheck. Getting on a serious budget and making lifestyle adjustments could therefore be your ticket to carving out some money for your nest egg and salvaging your retirement in the process.
IMAGE SOURCE: GETTY IMAGES.
Once you have your budget set up, comb through it to see where your money is going, and commit to making a few major changes that free up cash. That could mean downsizing to a smaller home, going car-less if there's low-cost public transportation where you live, or eating at home rather than dining out three or four times a week. Smaller changes, like downgrading your cable plan, will help, too, but if you're without retirement savings at all, you'll need to think big to make a difference.
2. Start making catch-up contributions to your IRA or 401(k)
The good thing about being in your 50s is that you're allowed to contribute more to a 401(k) or IRA than younger folks. Currently, workers 50 and older can put up to $25,000 a year into a 401(k) and up to $7,000 into an IRA. Those under 50, meanwhile, max out at $19,000 and $6,000, respectively.
Of course, if you're not in the habit of saving any money at all for retirement, it'll no doubt be a challenge to max out either account type. But let's assume you're housing your savings in an IRA. If you were to sock away $6,000 a year for the next 15 years and invest your savings at an average annual 7% return, you'd wind up with about $151,000. On the other hand, if you were to take advantage of that $1,000 catch-up and instead save $7,000 a year, you'd retire with around $176,000, assuming that same time frame and return on investment. That extra $25,000 could make a huge difference during your golden years, so it pays to push yourself to come up with that additional $1,000 annually.
3. Get a side hustle
There may come a point when you can only cut back on so many expenses or make so many sacrifices to free up cash for your nest egg. If you've exhausted those options, it may be time to consider a side hustle. Of the millions of Americans who have a second gig on top of a main job, 14% are taking on that extra work for the express purpose of saving for retirement.
Not only might a second job help you give your 401(k) or IRA a much-needed boost, but it might also be a gig you're able to continue doing during retirement to supplement your income down the line. And if you've reached your 50s without savings, chances are, you'll need all the money you can get once your full-time career comes to an end.
As of 2016, only 52% of workers 55 and older were saving for retirement in a 401(k) or IRA, according to the U.S. Government Accountability Office. Meanwhile, Social Security will replace only about 40% of the average worker's pre-retirement income, and most seniors need close to double that amount to live comfortably. If you're in your 50s without savings for your golden years, it's time to make some serious changes. Otherwise, you'll risk struggling financially when the time comes to finally leave the workforce.
Keijiro Nawata’s mother, Yaeko Nawata, who suffers from dementia, was sold multiple insurance policies by government-controlled Japan Post.
Photo:
Ko Sasaki for The Wall Street Journal
SANYO-ONODA, Japan—
Keijiro Nawata,
a 38-year-old truck driver, had finished the day’s deliveries and was changing his truck’s oil in the shop one day in June last year when an uncle called saying something was wrong. Mr. Nawata’s mother had received a letter urging her to pay $3,600 in overdue life-insurance premiums, the uncle said.
Mr. Nawata immediately called the insurance office and set up a meeting for the next day, where the news got worse. He discovered that salesmen had persuaded his mother, who suffers from dementia, to take out a dozen policies costing her $2,400 a month—twice her income. She had even been induced to get a $7,000 bank loan to cover payments when she ran out of money.
The company selling all those policies was no fly-by-night operator. It was government-controlled
Japan Post Holdings Co.
, one of the world’s largest financial groups, with trillions of dollars in assets.
“I couldn’t believe it, because I had absolute trust in the post office,” said Mr. Nawata as he showed the pile of contracts with his mother’s shaky signature. “This is very much like the work of gangsters.”
What happened to 71-year-old
Yaeko Nawata
and tens of thousands of other Japan Post policyholders has now ballooned into the biggest scandal since the company’s partial privatization a decade ago and highlighted the pressure that rock-bottom interest rates may be putting on institutions around the globe.
The family sifted through stacks of papers, noting each policy and each payment.
Photo:
Ko Sasaki for The Wall Street Journal
When longer-term rates are negative—as in Japan and parts of Europe, including Germany—it is hard to profit from the difference between short-term and long-term rates, the bread and butter of banks and insurance companies. The U.S. is also experiencing near-record-low interest rates that some economists believe may last for years.
Japan Post said that over the past five years, it sold some 183,000 policies that may have gone against customers’ interests. The company is conducting an internal investigation of the matter.
Japan Post’s core life-insurance products are more like savings plans because they promise returns to policyholders even while they are living. When interest rates were 5% or 6%, Japan Post could offer attractive plans simply by investing in government bonds and letting the interest compound for decades. Today, savers might do as well stuffing their money under a mattress.
“Because of low interest rates, savings-style insurance is not very popular,” Japan Post Holdings President
Masatsugu Nagato
said at a news conference July 31.
“It’s now very hard” to sell policies, said
Masahiko Suzuki,
who has worked as a salesman for three decades at a central-Japan post office. Elderly people, he said, have good memories of the days when the products were more attractive, “so it’s easy to trick them.” Mr. Suzuki said he refused to do that and was a low performer.
One of the salesmen who sold policies to Ms. Nawata,
Koichi Tokutomi,
raised his voice when The Wall Street Journal called and asked about the case. “Why are you calling only me? I’m not the only person who does this!” Mr. Tokutomi said.
He is still employed at the post office in Sanyo-Onoda, an industrial seaside town with cement factories along the coast. Officials at the post office referred questions to Tokyo headquarters, where a spokeswoman declined to comment on the case.
The post office in Sanyo-Onoda, Japan.
Photo:
Ko Sasaki for The Wall Street Journal
Japan Post has apologized and said it would do its best to recover customers’ trust. At the July 31 news conference,
Kunio Yokoyama,
president of Japan Post Co., said, “I strongly regret” that unrealistic goals “put a lot of pressure on our employees.”
The 148-year-old financial behemoth has long been about more than just delivering the mail. With savings accounts and life-insurance policies, Japan Post brought modern finance to all corners of the nation with a network that now includes 24,000 post offices.
Japan Post Holdings Co. went public in 2015 along with its banking and insurance subsidiaries. The government now owns 57% of the holding company, which in turn owns 64.5% of the insurance unit.
As of last year, nearly 90% of Japanese households had insurance policies, with about four per household on average, according to the Japan Institute of Life Insurance.
But the industry has been through a rough period. Several insurance companies went bankrupt around the turn of the century, when the
Bank of Japan
’s benchmark rate was headed to zero for the first time. Overall, industry revenue has fallen nearly 40% since 2011, and the number of policies held at Japan Post has fallen by nearly half over the past decade to 29 million.
The insurance institute’s surveys released last year found that while Japan Post’s policies are seen as less attractive, it still received top ratings for trustworthiness.
Many customers are hanging on to lucrative older policies sometimes known as treasure insurance.
Kyoko Okamoto,
a 66-year-old who works part time at a parcel-delivery company, said she signed up for insurance when she was 20 and took out a loan from the post office to pay premiums when she was going through a rough patch. She said the terms were favorable by today’s standards and she has been collecting about $9,500 every five years, with the first payout coming at age 60 and the last to come at age 75. “I’m glad that I could manage to cling to it,” she said.
A poster inside of the Sanyo-Onoda post office advertising one of the products sold by Japan Post.
Photo:
Ko Sasaki for The Wall Street Journal
Some sales representatives try to persuade people to exchange their treasures for the insurance equivalent of trinkets: new policies with lower returns. Japan Post says its improper sales methods included charging policyholders twice for overlapping coverage.
Commissions account for 25% of annual income for the median postal salesperson, according to Japan Post, which cut salespeople’s base salaries in 2015 to emphasize incentive pay. Low performers have been sent to training where they were berated and humiliated with comments such as, “You’re useless!” said
Kazuhiro Kamon,
vice chairman of the labor union for the postal industry. Japan Post spokesman
Hideo Murata
said such training may have happened in the past but the company now offers proper training.
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What lessons about consumer protection can be learned from Japan Post’s sales practices? Join the conversation below.
At her spacious traditional home, Ms. Nawata, still wipes the wooden hallway floors every day and feeds stray cats that come to her Japanese garden, despite advancing dementia. When her 38-year-old younger son visited on a recent Sunday with a reporter, she said happily to him, “Oh, my goodness, you have become taller!”
According to Mr. Nawata, two salesmen visited his mother in May 2017, a month after
Japan Post Insurance
raised some premiums to reflect lower expected interest rates. Among the policies she was induced to buy were two from
Aflac Inc.
The U.S. company declined to comment about Ms. Nawata and said it was looking into sales practices.
It took months for Mr. Nawata and his uncles to sort stacks of papers. They wrote down by hand each policy and each payment.
After half a year, the family managed to cancel all Ms. Nawata’s policies and get back the money she paid.
“I should have paid more attention to my mother. But the bonds with my family are now stronger,” Mr. Nawata said. He used to visit his mother only on weekends, but now stops by after work almost every day.
Keijiro Nawata and his mother, Yaeko Nawata, in her home in Sanyo-Onoda.
Photo:
Ko Sasaki for The Wall Street Journal
When the U.S. Supreme Court chose to support same-sex marriages a year later, Cathy posted on Twitter that the "founding fathers would be ashamed of our generation" and pronounced it a "sad day for our nation."
The company's charitable foundation has also donated millions to anti-LGBTQ organizations, according to multiple U.S. media reports.
The chain plans to open 15 locations in the Greater Toronto Area in the next five years. There's currently only one other Canadian location, at the Calgary International Airport.
"We respect people's right to share their opinions and want all Torontonians to know they are welcome at Chick-fil-A Yonge & Bloor. Our focus is on offering a welcoming and respectful environment for our guests and team members, and we encourage people to give us a try," read a statement emailed to the Star from Wilson Yang, operator at Chick-fil-A's Toronto location.
A few counterprotesters showed up at Friday's grand opening holding homophobic signs.
Controversial Evangelical pastor Rev. Charles McVety, president of Canada Christian College and a vocal opponent same-sex marriage, came down to support the chain.
"I'm all for freedom," he told reporters outside.
"The founder of this great restaurant chain, the third largest in America, he supports many Christian charities and because he supports Christian charities the bullies come out."
But others in line said they were there for the chicken.
"I'm here because the food is good," said Hanan Mohamed, sipping a frozen lemonade.
"Everyone has their own views and we should be able to eat what we want."
Mohamed has eaten at the franchise in several U.S. cities, including Atlanta where it's based. She arrived around 9 a..m. and stood in line for about an hour and a half, "but it was worth it."
She said she disagrees with the company's stance on LGBTQ issues, but said only a bad customer service experience would make her not want to eat there.
"I love chicken," added Sam Bersam, waiting in line around the corner.
"To be honest, I'm with them," he said of the company. "They have the right to open wherever they want."
At one point on Friday, protesters lay on the sidewalk in front of the restaurant for a "die in," and chanting "Chick-fil-A go away, homo vegans here to stay," while a line of police officers stood on Yonge St. keeping watch.
Protester Rolyn Chambers got into a heated discussion with a Chick-fil-A supporter.
"How can I be calm when my rights are at risk?" he asked. "It's about the money they give, that's the point."
Chambers came with a sign he said was inspired by a Seinfeld episode.
"Baaaad chicken" read the sign.
"Don't eat hate."
With files from The Canadian Press
With files from The Canadian Press
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September 07, 2019 at 03:01AM
