Credit Suisse To Take $4.7 Billion Hit From Archegos Scandal

Plus, Starbucks is phasing out disposable cups in South Korea by 2025, United Airlines is opening a pilot training school, and sports trading cards maker Topps is going public via a SPAC merger.

Stocks were lower at the open with the Dow dropping 27 points, or less than 0.1%. The S&P 500 slid by less than 0.1%, while the Nasdaq fell by nearly 0.2%.

Credit Suisse said this morning that it will take a $4.7 billion hit from the Archegos hedge fund scandal, and announced several high-level staff departures amid the fallout including Investment Bank CEO Brian Chin and Chief Risk and Compliance Officer Lara Warner. The $4.7 billion writedown tied to its Archegos exposure means it will cut its dividend and suspend share buybacks. “Serious lessons will be learned,” said CEO Thomas Gottstein in a statement, adding that the Archegos loss “is unacceptable.” While Credit Suisse is far from the only bank that allowed Bill Hwang’s family office to lever up large positions in a few stocks, other prominent banks managed to unwind their exposure quickly and with minimal damage. Goldman Sachs CEO David Solomon said today that his bank’s risk management systems performed well amid the unwinding. “From my perspective, our risk controls worked well,” Solomon said. “We identified risk early on. We took prompt, corrective action to lower our risk according to the contract we had with the client. And I can’t really speak to what other banks have done and how they’ve handled the situation, but I’m very pleased with how our team handled it.”

After the U.S. vaccinated more than 4 million people against the coronavirus on Saturday, President Joe Biden is expected to announce today that states should open COVID-19 vaccine appointments to all U.S. adults by April 19, moving up his deadline by nearly two weeks. Most states have already announced plans to open eligibility to all adults by April 19, with only Hawaii and Oregon having not already announced plans to have open eligibility by that date. Biden is also set to announce today that the U.S. has reached 150 million shots administered within his first 75 days in office, with the pace of vaccinations averaging around 3.1 million doses per day since last week. 

Starbucks shares are up nearly 2% this morning after the coffee chain giant said it will discontinue disposable cups in South Korea by 2025 as it aims to cut its global landfill waste in half by the end of the decade. The move marks the first such measure in a major market by Starbucks, and the company said it will launch a “cup circularity” program in South Korea beginning in July where customers will be served beverages in reusable cups that require a “small deposit” that will be refunded on return to contactless kiosks. “Starbucks Coffee Korea is a leader in sustainability for the company globally, and we are excited to leverage the learnings from this initiative to drive meaningful change in our stores and inform future innovation on a regional and global scale,” Sara Trilling, the president of Starbucks Asia Pacific, said in a statement.

United Airlines announced that it has started accepting applications for its flight academy as part of its push to hire 10,000 pilots by 2030 as more of its aviators reach the federally mandated retirement age of 65. The carrier announced last year that it had bought a flight school, but was forced to put training plans on hold due to the coronavirus pandemic. The flight school is meant to provide training to pilots with little-to-no-experience, and wants to half of its trainees to be women and people of color in an effort to increase diversity. United also said that it would fund $1.2 million in scholarships “to break down the financial barriers that limited access to the airline pilot career path for generations of women and people of color,” while JPMorgan said it would provide an additional $1.2 million in scholarships to the school to help increase diversity.

And baseball cards and Bazooka candy maker Topps will go public via a SPAC merger with Mudrick Capital Acquisition Corporation II in a deal that values Topps at $1.3 billion. The deal is expected to close in the late second or early third quarter, and the combined company will be called Topps and will trade on the Nasdaq under the ticker TOPP. Topps’ net sales rose 23% in 2020 to a record $567 million, and while the company is best known for its sports trading cards, it has also branched into interactive mobile apps to connect collectors and recently expanded into NFTs.

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Leaf Group Ltd (NYSE: LEAF): Leaf Group shares jumped nearly 24% yesterday after announcing that it has agreed to be acquired with Graham Holdings Company for $8.50 per share in an all-cash deal valued at around $323 million. “We could not be more pleased to be joining forces with an organization with such a rich history and shared commitment to excellence,” Leaf Group CEO Sean Moriarty said in a press release. “Together, we look forward to continuing to build on the strong momentum Leaf Group generated over the past year, with the additional resources and expertise of Graham Holdings helping us further grow the reach of our young brands and innovate for our customers, creators and audiences.”