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Weekly Wrap: Coinbase IPO Sets Record As GameStop Strengthens Finances, Housing Steadies, and More Are Going Green 

Weekly Wrap

Coinbase debuted with a bang. In addition, GameStop helped its bottom line by shedding debt. Meanwhile, new home construction is trending up and so is ESG investing.

COINBASE IPO

The much anticipated Coinbase IPO exceeded expectations. The stock, which trades as COIN, closed Friday at $342 a share.

The reference or projected opening price of COIN was $250. However, the actual opening price jumped to $381 and closed at $321.28 Wednesday.

Coinbase functions as an exchange on which investors buy and sell cryptocurrencies. Subsequently, many buyers choose to hold cryptocurrencies as an investment. As a result, Coinbase also offers a digital wallet.

Coinbase Revenue Sources

Coinbase charges fees for transactions. One is a flat rate or percentage of each transaction. The other is the margin, up to two percent of each transaction. Other sources of income include:

  • Coinbase Commerce – provides payment processing for online merchants.
  • Coinbase Card- a Visa debit card that converts cryptocurrencies to U. S. dollars for purchases.
  • USD Coin– Coinbase’s cryptocurrency that is tied to the U. S. dollar.  

Cainbase took the unusual route of offering its IPO as a direct listing. That saves money in that the listing does not go through an investment bank as most IPOs do.

GameStop Continues Wild Ride

GameStop’s longest losing streak in a year ended this week. And though many analysts were pressing the sell button, the stock rallied on important news. It closed at $154.69 Friday. 

GameStop announced Tuesday it will use cash to pay off $216.4 million in corporate notes by April 30. Those notes are the last of the company’s long-term debt. That spurred a buying surge and the stock rose 18 percent Wednesday.

The retailer made several other moves to strengthen its financial position. It announced that it plans to sell up to 3.5 million shares of stock.

Changes At The Top 

CEO George Sherman forfeited 587,000 shares of stock for failing to meet performance targets Wednesday. The company is searching for Sherman’s replacement.

Ryan Cohen, former founder and CEO of Chewy, was announced as the company’s new chairman of the board Thursday. He will assume that post in June. Cohen, who has a 13 percent stake in GameStop, has been pushing the company to move more into the digital marketplace.

The Short Shift 

GameStop was among the 10 most shorted stock since March 15. However, the stock had gained as much as 650 percent this year. Its 52-week high was $483 a share compared to a low of $3.77 a share. 

GameStop’s meteoric price rise was triggered by social media-driven buying. Last year, many professional investors held short positions (betting the stock would drop). A surge of buying promoted largely on a Redditt forum forced short-sellers to buy the stock to limit their losses. 

It is known as a ‘squeeze’ and it propelled GameStop stock to new heights.

Going Green

It’s Spring and everything is turning green — even in the world of investing.

Big banks, investment managers, ETFs, and mutual funds are all moving more and more money into ESG (environment, social, and governance) investments.

Tomorrow Saving Advice takes a look at this trend and why the SEC (Securities and Exchange Commission) is interested.

Housing

Residential real estate is still a seller’s market. However, a number of new trends are developing. Mortgage rates seem to be stable; homes in forbearance are dropping; new home starts are up; and a further ban on foreclosures is in the offing.

Forbearance

The number of homes in forbearance continues to decline. Your home is in forbearance if your lender allows you to pay a lower rate or suspends payments temporarily. 

Black Knight, an analytics company, reported last week that 2.3 million mortgage borrowers remained in forbearance as of April 6. That is a decline of 228,000 over the previous week and the biggest drop in six months. 

The number of homes entering forbearance also plummeted. According to Black Knight, 158,000 homes entered the program in the previous four weeks. That is a decline of 18 percent.

Additional Foreclosure Safeguards

The Consumer Protection Finance Bureau (CPFB) last week proposed a new rule to bar foreclosures on principal residences until the end of the year. The ban would apply to both private and federal mortgages.

About 1.7 million homes will come out of forbearance in September, according to the CFPB. Many of those homes will be at risk of foreclosure. The objective of the ban extension is to give lenders and homeowners time to restructure their loans if possible.

Single Family Building Increasing

The number of single-family home construction permits issued in the first two months of the year increased 16.6 percent over the same period in 2020, according to the National Association of Home Builders (NAHB). About 164,901 permits were issued nationwide, reports the NAHB.

In addition, multi-family building permits were also up. The NAHB reported 83,110 such permits were issued across the country. That marks an increase of 17.7 percent over the 70,635 issued the first two months of last year.

What Lies Ahead

The housing market looks healthy, according to Freddie Mac’s Quarterly Forecast

“As the economy continues to improve, we expect conditions to remain generally favorable for the housing and mortgage market,” said Sam Khater, Freddie Mac’s Chief Economist.

Higher housing prices and rising mortgage rates have the potential to slow the housing market, cautioned Khater.

Looking ahead to next year, Freddie Mac’s forecast projects:

  • The average 30-year fixed-rate mortgage will be 3.2 percent in 2021 and 3.7 percent in 2022.
  • House price growth is expected to be 6.6 percent in 2021, slowing to 4.4 percent in 2022.
  • Home sales are expected to reach 7.1 million in 2021, falling to 6.7 million homes in 2022.
  • Purchase originations are expected to increase to $1.7 trillion in 2021 before dropping to $1.6 trillion in 2022.
  • Refinance originations are expected to be $1.8 trillion in 2021 before falling to $770 billion in 2022. 
  • Overall, annual mortgage origination levels are expected to be $3.5 trillion in 2021 and $2.4 trillion in 2022.

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