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Robinhood founders to be worth over $5 billion as fintech IPOs pile up

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Vlad Tenev and Baiju Bhatt, who co-founded Robinhood.

Mark Neuling | CNBC

Fintech is minting billionaires by the month.

Already this year, Coinbase’s co-founders have joined the billionaire ranks, along with the founders of Affirm and Marqeta. For years, Silicon Valley has been taking on the banking incumbents with promises of a better customer experience, but it’s only now that emerging trading apps, payment upstarts and online lenders are achieving big public market valuations.

Now, it’s Robinhood’s turn.

Vlad Tenev and Baiju Bhatt, who were roommates at Stanford almost a decade ago, are each poised to be worth about $2.6 billion on paper when their trading app debuts on the Nasdaq later this month. That’s based on the $40 mid-point of the company’s price range given in its updated IPO prospectus on Monday.

Tenev, Robinhood’s CEO, and Bhatt, the chief creative officer, will each own 7.9% of the company’s outstanding shares, according to the filing. They’re also each selling about $50 million worth of shares in the offering.

It’s been a banner year for tech listings, with at least 12 companies that went public through an IPO, direct listing or special purpose acquisition company (SPAC) attaining a market capitalization of $10 billion or more. Between those companies and a few others with lower valuations, the tech industry has minted 16 billionaires in 2021.

Fintech is capturing an outsized share of the gains.

Coinbase CEO Brian Armstrong owns stock in his cryptocurrency app worth about $8.7 billion after the company’s direct listing in April. Fred Ehrsam, who co-founded the company with Armstrong in 2012, owns a $2.7 billion stake. Marqeta CEO Jason Gardner is worth close to $2 billion after taking his payment technology company public last month, while Affirm’s Max Levchin owns shares valued at over $1.5 billion in his online lender, which held its IPO in January.

Coinbase Founder and CEO Brian Armstrong attends Consensus 2019 at the Hilton Midtown on May 15, 2019 in New York City.

Steven Ferdman | Getty Images

SoFi, a provider of college loans, home loans and a variety of investment and insurance products, went public through a SPAC in June and is now valued at $12 billion, though no individual holder owns a billion-dollar stake.

That’s before dipping into the companies that are still private. Payments company Stripe was valued at $95 billion in a financing round in March, giving sibling co-founders Patrick and John Collison a combined stake of $23 billion, according to the Bloomberg Billionaires Index. Klarna, a Swedish payments company, is now worth $46 billion on the private market. Klarna CEO Sebastian Siemiatkowski has a net worth of $2.2 billion, according to Forbes.

The list goes on. Chime, which delivers banking services through mobile phones, is worth $14.5 billion, while Plaid, which provides back-end technology that connects apps with bank accounts, is valued at $13 billion after Visa was forced to scrap its planned acquisition of the company.

“Our market is seeing a sea change, with consumers that we never thought would be embracing digital finance engaging with it in a big way,” Zach Perret, Plaid’s CEO and co-founder, told CNBC, when the latest financing round was announced in April.

Robinhood said it plans to sell shares at $38 to $42 each prior to its expected Nasdaq debut next week. That could value Robinhood at up to $35 billion, up from a private market valuation of $11.7 billion in September.

Users flocked to Robinhood in the first quarter as crypto trading volumes soared and the popularity of meme stocks like GameStop and AMC Entertainment led millions of new traders to the app. At the end of March, Robinhood had 17.7 million monthly active users, up from 11.7 million at the close of 2020.

Robinhood co-founders will retain voting control

Robinhood ultimately raised $1 billion from investors to shore up its balance sheet, but the incident raised questions about the company’s business model, known as payment for order flow. Robinhood lets users buy and sell for free, and charges market makers such as Citadel Securities or Virtu for the right to execute customer trades.

The Financial Industry Regulatory Authority said in June that Robinhood will pay roughly $70 million in penalties for its systemwide outages and misleading communication and trading practices. The company faces dozens of proposed class-action lawsuits, as well as examinations or investigations by regulators, state attorneys general, the SEC, FINRA, and the U.S. Department of Justice.

In its initial prospectus earlier this month, Robinhood disclosed that Tenev’s phone was seized by federal attorneys as part of the GameStop probe.

Still, Robinhood’s co-founders, who are both board members, are positioned to profit handsomely when the company goes public and will control the vast majority of decisions from here.

Tenev and Bhatt will own all of Robinhood’s Class B shares after the offering. Those shares have 10 times as much voting power as Class A shares, according to the prospectus, giving Tenev will control of 26% of voting power, and Bhatt control of 39%.

They’ve already cashed out tens of millions of dollars worth of shares.

In 2018, they each sold $55 million of stock to investment firm DST Global in a secondary transaction, and the following year the co-founders participated in a $67.6 million tender offer available to “certain of our employee stockholders,” the filing said.

Robinhood is a five-time CNBC Disruptor 50 company that topped this year’s list.

WATCH: CNBC’s full interview with Plaid CEO Zach Perret

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White House prepares for potential government shutdown

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Treasury Secretary Janet Yellen, center, Speaker of the House Nancy Pelosi, D-Calif., and Senate Majority Leader Charles Schumer, D-N.Y., arrive for a news conference to announce a framework for President Bidens economic plan in the Capitol Visitor Center on Thursday, September 23, 2021.

Tom Williams | CQ-Roll Call, Inc. | Getty Images

Democrats in Congress scrambled Thursday to beat a string of deadlines that hold massive stakes for both the health of the U.S. economy and President Joe Biden’s sweeping economic agenda.

House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Chuck Schumer, D-N.Y., aim to work their way out of multiple binds as they try to prevent a government shutdown, a default on U.S. debt and the collapse of Biden’s domestic ambitions.

The leaders first find themselves staring at a Sept. 30 deadline to pass an appropriations bill before government funding lapses. The White House on Thursday began to advise federal agencies to prepare for the first government shutdown of the Covid-19 era.

The White House Office of Management and Budget is taking steps to let department and agency leaders know that, barring a new appropriations bill, they are expected to execute shutdown plans starting late next week. For many agencies, those plans often include sending workers home.

The office typically asks agencies seven days before a government shutdown to update their plans and will share a draft template each department can use to update government employees on congressional efforts to pass a funding bill and how many workers may need to be furloughed.

The communication does not reflect the office’s views on whether a continuing resolution is likely or not and is viewed as more of a formal duty.

Efforts to pass a new budget are underway on Capitol Hill, where House Democrats earlier this week passed a measure to fund the government, suspend the debt ceiling, and approve emergency aid such as disaster relief.

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That proposal is expected to stall in the Senate, where Republicans are unanimous in their opposition to any bill that seeks to raise or suspend the debt ceiling. 

Democrats are on tight economic timelines. Some are self-imposed, such as Pelosi’s promise to hold a vote on a $1 trillion infrastructure bill on or before Sept. 27. The Senate has already passed the measure.

But there are other, standing deadlines. While Congress must pass a new budget by the end of September to avoid a shutdown, lawmakers must also figure out a way to increase or suspend the debt ceiling by a to-be-determined “drop-dead” date.

Treasury officials estimate that lawmakers have until some point in October before the U.S. would default on its debt for the first time.

Despite the time crunch, Schumer has promised to take up the House-passed debt ceiling and government funding bill nonetheless and force the GOP to publicly vote against a bill that would keep the government open and allow the Treasury Department to continue to pay for legislation Congress has already authorized.

Raising or suspending the debt ceiling, or borrowing limit, does not authorize new federal spending, but allows Treasury to pay for legislation that lawmakers have already passed. An increase would allow the department to pay off bills associated with the trillions in Covid relief enacted under former President Donald Trump and Biden.

Many suspect that Pelosi will be forced to pass a new resolution without the debt ceiling to keep the government open. Senate Minority Leader Mitch McConnell, R-Ky., has said on multiple occasions that he would support such a “clean” bill to avoid a shutdown.

Separately, Pelosi and Schumer declared Thursday morning that they had reached an agreement on the “framework” for taxes that would be needed to fund Democrats’ $3.5 trillion package to revolutionize the U.S. public safety net.

“The White House, the House and the Senate have reached agreement on a framework that will pay for any final negotiated agreement,” Schumer said. “So, the revenue side of this, we have an agreement on. It’s a framework. An agreement on the framework.”

Moderate and progressive Democrats have clashed over the size and scope of the package. Neither Pelosi nor Schumer clarified whether the negotiators had made decisions whittling down their options for financing the bill, or were simply in agreement over which of many options they are collectively willing to consider.

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CDC panel endorses third Pfizer doses for millions

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Lisa Wilson receives a shot of the Pfizer vaccine at a mobile COVID-19 vaccination site in Orlando, Florida.

Paul Hennessy | SOPA Images | LightRocket | Getty Images

A key Centers for Disease Control and Prevention advisory group voted Thursday to recommend distributing Pfizer and BioNTech‘s Covid-19 booster shots to older Americans, nursing home residents and other vulnerable Americans, clearing the way for the agency to give the final OK as early as this evening.

The agency’s Advisory Committee on Immunization Practices specifically unanimously endorsed giving third Pfizer shots to people 65 and older and nursing home residents in the first of four votes. The panel also recommended third shots for adults age 18 to 64 with underlying conditions.

The panel will also vote on whether to recommend the shots for adults who are more frequently exposed to the virus – possibly including people in nursing homes and prisons, teachers, front-line health employees and other essential workers.

The elderly were among the first groups to get the initial shots in December and January.

The vote is seen as mostly a win for President Joe Biden, whose administration has said it wants to give booster shots to all eligible Americans 16 and older as early as this week. While the CDC panel’s recommendation doesn’t give the Biden administration everything it wanted, boosters will still be on the way for millions of Americans.

The endorsement comes a day after the Food and Drug Administration granted emergency use authorization to administer third Pfizer shots to many Americans six months after they complete their first two doses. While the CDC’s panel’s recommendation isn’t binding, Director Dr. Rochelle Walensky is expected to accept the panel’s endorsement shortly.

Walensky addressed the committee Thursday before the vote, thanking them for their work and laying out what’s at stake.

“These data are not perfect, yet collectively they form a picture for us, and they are what we have in this moment to make a decision about the next stage in this pandemic,” she said.

Prior to the vote, some committee members said they worried that widely offering boosters could interfere with efforts to get the shots to the unvaccinated or potentially reduce confidence in the vaccines’ effectiveness. Others were frustrated that only Pfizer recipients would be eligible to get the shots, leaving out millions of Americans who got the Moderna and Johnson & Johnson vaccines.

The vote came at the end of a two-day meeting, where CDC advisors listened to several presentations on data to support the wide distribution of booster shots, including one presentation from a Pfizer executive who displayed data that showed a third shot appears to be safe and boost antibody levels in recipients.

During one presentation Thursday, CDC official Dr. Sara Oliver presented observational studies from Israel, where officials began inoculating the nation’s population ahead of many other countries and began offering third shots to their citizens in late July.

The Israel data has been criticized by at least one FDA official as so-called observational studies don’t adhere to the same standards as formal clinical trials.

“We can use the experience from Israel to inform our knowledge of the safety of boosters,” Oliver said, adding the country has only reported one case of a rare heart inflammation condition known as myocarditis out of nearly 3 million third doses administered.

CDC official Dr. Kathleen Dooling said data also suggests a third dose may reduce the risk of severe illness in older adults and people with comorbidities. Potential risks include myocarditis, although this risk is very rare, occurring mostly in males under 30, she said.

“The third dose of Pfizer-BioNTech Covid-19 vaccine appears to have similar reactogenicity as the second dose,” she added.

The topic of who should get boosters and when has been a contentious topic among the scientific community since the Biden administration outlined its plan to widely distribute boosters last month.

In a paper published days before an FDA advisory meeting last week, a leading group of scientists said available data showed vaccine protection against severe disease persists, even as the effectiveness against mild disease wanes over time. The authors, including two high-ranking FDA officials and multiple scientists from the World Health Organization, argued in the medical journal The Lancet that widely distributing booster shots to the general public is not appropriate at this time.

In outlining plans last month to start distributing boosters as early as this week, Biden administration officials cited three CDC studies that showed the vaccines’ protection against Covid diminished over several months. Senior health officials said at the time they worried protection against severe disease, hospitalization and death “could” diminish in the months ahead, especially among those who are at higher risk or were inoculated during the earlier phases of the vaccination rollout.

This is a developing story. Please check back for updates.

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NIH Director Collins calls Israeli data ‘impressive’

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A patient receives his booster dose of the Pfizer-BioNTech coronavirus (COVID-19) vaccine during an Oakland County Health Department vaccination clinic at the Southfield Pavilion on August 24, 2021 in Southfield, Michigan.

Emily Elconin | Getty Images

National Institutes of Health Director Dr. Francis Collins called Israel’s data on Covid-19 booster shots “impressive,” noting that they provided a tenfold reduction in infection for people who received a third dose.

Israel began administering boosters in late July to individuals over 60, giving scientists more time to examine their ability to combat Covid and bolster the waning effectiveness of the initial series of doses. Collins’ comments Thursday came just a day after the Food and Drug Administration approved Pfizer and BioNTech’s Covid booster for high-risk people, including anyone 65 and older.

“Without tipping my hand too much, I will say the data looks really impressive, that the boosters do in fact provide substantial reduction in infection,” Collins said during a discussion on Covid hosted by Bloomberg Philanthropies. “Like a tenfold reduction just within 12 days after that booster, and also a reduction in severe illness, which is the thing we’re most concerned about.”

Collins added that the Israeli data indicated a roughly twelvefold reduction in severe Covid as the nation was starting to experience more breakthrough cases. Pfizer reported on Aug. 25 that recipients of its third doses experienced a threefold increase in antibodies.

The CDC’s Advisory Committee on Immunization Practices, a panel of medical authorities who offer guidance to the agency, will vote Thursday on whether to endorse the FDA’s booster decision. The panel began a two-day series of presentations on boosters on Wednesday to give experts and the public a chance to hear more data before the final vote.

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