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Biden is aiming for diplomacy with Russia over Ukraine, Airbnb tops estimates as
travelers shift to longer stays, Ericsson shares sink on Iraq corruption probe,
and other news to start your day.
Barron's Daily
February 16, 2022

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Roblox visited the New York Stock Exchange for its direct listing on March 10,
2021.
NYSE


FIRST ROBLOX, THEN NVIDIA. IT’S A BIG DAY FOR THE METAVERSE.

Financial markets are at the moment focused on the very real-world issue of
thousands of troops massed on Ukraine’s border. But the landscape of an entirely
different world—that of the metaverse—is beginning to take shape.

The virtual world is potentially a massive growth opportunity, one that Facebook
in particular is betting heavily on after rebranding to Meta Platforms last
year. Meta CEO Mark Zuckerberg has declared that its employees will now be
called ‘Metamates.’

It isn’t the only company seeing metaverse potential. JPMorgan has become the
first Wall Street bank to enter the metaverse. The bank has opened a lounge in
the virtual reality platform Decentraland, where users will find a roaming tiger
and a portrait of CEO Jamie Dimon.

But it’s still a long-term bet. A big loss for Meta’s Web3 division saw
metaverse-related stocks tumble earlier this month.

Shares in metaverse pioneer Roblox plunged more than 16% in premarket trading
Wednesday after a wider-than-expected net loss. Yet Roblox reported record daily
active users of 49.5 million and record hours engaged of 10.8 billion, up 28%,
in the fourth quarter. The appetite to get involved in virtual platforms is
growing.

Another major player in the future development of the metaverse will step up to
the plate later on Wednesday. Nvidia, which became the seventh largest U.S.
company earlier this month after overtaking Meta, reports earnings after the
close.

Nvidia’s gaming and data center segments will predominantly drive earnings, but
investors will have one eye on any metaverse updates.

—Callum Keown

*** Join Quentin Fottrell, MarketWatch managing editor, personal finance, today
at noon as he talks to tax reporter Andrew Keshner about what to expect this tax
season. Sign up here.

***



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***

BIDEN AIMING FOR DIPLOMACY WITH RUSSIA OVER UKRAINE

President Joe Biden said the U.S. hasn’t verified Russia’s claim Tuesday that it
was withdrawing some troops from near Ukraine’s border, saying “an invasion
remains distinctly possible.” The North Atlantic Treaty Organization also cast
doubt on Russia’s pullback, as secretary-general Jens Stoltenberg told reporters
NATO was seeing increased numbers of troops.

 * Biden said 150,000 Russian troops are encircling Ukraine and neighboring
   Belarus, and urged Americans still in Ukraine to leave immediately. Biden
   said U.S. troops wouldn’t be sent to fight in Ukraine, but “will defend every
   inch of NATO territory.”
 * Russia’s comment on withdrawing troops helped U.S. stocks reverse three days
   of losses. The Nasdaq Composite posted a 2.5% gain, the S&P 500 rose 1.6%,
   and the Dow Jones Industrial Average gained 1.2%.
 * An invasion would also endanger the Nord Stream 2 natural-gas pipeline
   between Russia and Germany, as part of punitive economic measures that could
   be imposed if Russia initiates military action. Biden said Russian aggression
   would “put an end” to the pipeline.
 * Russian President Vladimir Putin said after meeting with German Chancellor
   Olaf Scholz earlier Tuesday that Moscow was “ready to follow the negotiation
   track,” but that Russian demands, including not expanding NATO, are “an
   unconditional priority.” Scholz said Ukraine joining NATO wasn’t on the
   agenda.

What’s Next: Ukraine’s Ministry of Defense and Armed Forces websites and online
services of its two largest banks were disrupted by suspected cyberattacks on
Tuesday, government and bank officials said in an English-language Facebook
post. They said it isn’t clear who initiated the attacks or why.

—Janet H. Cho

***

AIRBNB TOPS ESTIMATES AS TRAVELERS SHIFT TO LONGER STAYS

Airbnb is projecting first-quarter revenue well ahead of Wall Street estimates,
more evidence that the travel and leisure industry continues to recover from the
pandemic. Nights and experiences booked are expected to beat 2019 first-quarter
levels and average daily rates are projected to increase 4% from a year ago.

 * Airbnb reported fourth-quarter results that handily beat expectations, with
   short-term rentals and gross bookings coming in ahead of 2019 levels. It
   projected first-quarter revenue to be between $1.41 billion and $1.48
   billion, beating estimates for $1.24 billion.
 * Nearly half of nights booked in the fourth quarter were for stays of a week
   or longer—and one in five were for stays of a month or more, the company
   said. Over the past year, Airbnb added, the company booked nearly 175,000
   stays of three months or longer.
 * Gross nights booked in urban locations have nearly recovered to
   fourth-quarter 2019 levels. In the U.S., fourth-quarter gross nights booked
   for urban travel were up over 20% compared with the fourth quarter of 2019.
 * Hotel chain Marriott International also reported stronger than expected
   fourth-quarter results, saying revenue per available room (room sales divided
   by room nights available) rose 124% in the December quarter from 2020.

What’s Next: In the competition between rent by owner and hotel chains, Airbnb
is betting that remote work and worker flexibility will be two aspects of
postpandemic life that will boost its bottom line.

—Liz Moyer and Eric J. Savitz

***

ERICSSON SHARES SINK ON IRAQ CORRUPTION PROBE

Shares of Ericsson slumped Wednesday, a day after the company disclosed an
internal investigation in 2019 that detailed “serious breaches of compliance
rules” in Iraq.

 * Ericsson’s U.S.-listed shares dropped more than 11% in premarket trading,
   echoing losses seen in Stockholm.
 * In a statement late Tuesday, Ericsson said the investigation had found
   corruption-related misconduct, including improper use of sales agents and
   consultants.
 * The investigation also identified payments to intermediaries to use alternate
   transport routes in connection with circumventing Iraqi Customs, when
   militant organizations, including ISIS (now known as Islamic State),
   controlled some transport routes. Ericsson said It hasn’t yet determined who
   the final recipient of the money was and was working with external counsel to
   review the findings.
 * The probe was triggered by unusual expense claims in Iraq dating back to 2018
   and ended in 2019. Ericsson chose not to disclose it at that time because the
   findings weren’t material enough, but on Tuesday it said it had reviewed the
   investigation after inquiries from media outlets.

What’s Next: Ericsson paid the Department of Justice $1 billion in December 2019
to resolve an investigation into foreign corruption in countries including
China, Djibouti, and Vietnam. In October, Ericsson said the Justice Department
warned that it had breached its obligations under a deferred prosecution
agreement by failing to provide documents. If the Justice Department decides to
look into the latest revelations, it could result in more fines for Ericsson,
according to analysts.

—Lina Saigol

***

VIRGIN GALACTIC SELLING $450,000 TICKETS TO SPACE STARTING TODAY

Space tourism company Virgin Galactic opened another round of ticket sales for
people to reserve a seat on one of its future space flights, starting today
through its website virgingalactic.com. The announcement sent its shares flying
32% on Tuesday.

 * Virgin Galactic started selling tickets a decade ago, initially for around
   $250,000 each. Last summer it started selling them again, this time for
   $450,000 each, including a $150,000 upfront deposit. The price is still the
   same, and the balance has to be paid before flying.
 * CEO Michael Colglazier said they want to have 1,000 customers signed up by
   the time commercial service begins later this year. Founder Richard Branson
   made his inaugural space flight last June, beating fellow space billionaire
   and Amazon founder Jeff Bezos by a few weeks.
 * Aspiring astronauts must be 18 years old, pass detailed medical screenings,
   and undergo several days of spaceflight preparations at Spaceport America in
   New Mexico. Flight preparation also includes “money-can’t-buy” experiences,
   the company said.
 * Virgin had previously limited ticket sales to what it called “a significant
   list of early hand-raisers.” Analysts optimistic about space tourism have
   noted a “promising” market of at least 1.3 million billionaires worldwide.

What’s Next: Flying 1,000 passengers would require hundreds of flights and could
generate about $450 million in sales. Wall Street projects Virgin Galactic could
generate about $8 million in sales in 2022.

—Al Root and Janet H. Cho

***

DEMOCRATS WEIGH PAUSING FEDERAL GAS TAX TO HELP CUT COSTS

Democratic lawmakers are considering a proposal to suspend the 18.4-cent federal
gas tax for the rest of 2022 to help people cope with rising household costs
amid high inflation. The White House indicated “all options are on the table,”
but hasn’t endorsed the idea, the Washington Post reported.

 * Critics doubt the move would provide relief from rising gas prices because of
   tensions in Ukraine and Russia and ongoing supply-chain bottlenecks that
   continue to pressure prices. But the national average for unleaded is now
   $3.48 a gallon, according to GasBuddy, up nearly $1 since last year.
 * Revenue from the federal gas tax goes to the Highway Trust Fund to build and
   maintain highways and bridges and fund public transit spending. The Gas
   Prices Relief Act proposes suspending the gas tax until Jan. 1, 2023, and
   using transfers from the general fund for the Highway Trust Fund.
 * Sen. Maggie Hassan (D., N.H.) co-wrote the bill with Sen. Mark Kelly (D.,
   Ariz.). Biden said Tuesday that a Russian invasion of Ukraine could also
   raise energy prices for Americans, although his administration is working on
   ways to lessen the impact.
 * Sen. Joe Manchin (D., W.Va.), representing a coal state, said he wasn’t
   comfortable with the gas tax holiday potentially leaving federal highway
   funds in worse shape, the Post reported.

What’s Next: Marc Goldwein, senior policy director at the Committee for a
Responsible Federal Budget, is also critical of the idea of a gas tax holiday,
saying it would cost the federal government about $20 billion in lost revenue,
and could lead to higher inflation in 2023.

—Janet H. Cho

***

Dear Quentin,

My 53-year-old mother feels very financially responsible for her maternal family
that continues to reside in our native Caribbean country. She brought me and my
brother to this country two decades ago, and has since worked endlessly to
provide for us.

My brother and I have obtained college degrees, and now have great jobs because
of her efforts. She has thankfully gotten to the point where she makes a good
living even though she, unfortunately, continues to work what I feel is an
excessive number of hours.

She is planning on moving back home once she retires, but how can she possibly
calculate the cost of what it will take to keep giving money to her family? She
owes thousands of dollars on one credit card, and I am planning on paying it off
(not at her request).

I feel like I am enabling this behavior by helping her get out of the debt that
she has accumulated. I do intend on taking care of her in her later years, and
am afraid there will be nothing left of her own retirement money by the time
that moment comes.

—Concerned & Annoyed Daughter

Read The Moneyist’s response here.

—Quentin Fottrell

***

—Newsletter edited by Liz Moyer, Camilla Imperiali, Steve Goldstein, Rupert
Steiner







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