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Facebook requiring U.S. employees to be vaccinated to return to work

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An employee of the Internet company Facebook walks through the courtyard of the company campus in Menlo Park, California.

Christoph Dernbach | picture alliance | Getty Images

Facebook will require U.S. workers returning to its offices to be vaccinated, the company said on Wednesday.

“As our offices reopen, we will be requiring anyone coming to work at any of our US campuses to be vaccinated,” VP of People Lori Goler said in a statement. “How we implement this policy will depend on local conditions and regulations.”

Facebook will create processes for those who can’t be vaccinated for medical or other reasons, Goler said. The company will continue to evaluate its approach outside the U.S., Goler added.

Facebook had already told full-time employees that most of them could continue working from home beyond the pandemic if their jobs could be done remotely.

The news comes after Google CEO Sundar Pichai told employees earlier the same day that Google would delay its return to office plans by one month, citing the fast-spreading delta variant. Pichai also said returning workers would have to be vaccinated.

Apple earlier delayed its return to office plans, though it has not come out publicly with a vaccine requirement for workers. The company will require customers and staff to wear masks in many of its U.S. retail stores regardless of vaccination status beginning on Thursday, a person familiar with the matter told CNBC’s Josh Lipton.

Though employer-mandated vaccine requirements seemed rare just a few weeks ago, the rise of the delta variant and new guidance from the Centers for Disease Control and Prevention seem to have played a role in shifting some executives’ thinking.

On Tuesday, the CDC walked back its earlier mask guidance for fully vaccinated people, saying that they should again wear masks indoors in places with high Covid-19 transmission rates. CDC Director Rochelle Walensky said the change was due to new information on the delta variant, showing that some vaccinated people infected by the strain could continue to spread it to others.

WATCH: Employers weigh Covid vaccine mandates and incentives for employees

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Nike can turn its snarled supply chain to its advantage

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A pedestrian walks past American multinational sport clothing brand, Nike store and its logo seen in Hong Kong.

Budrul Chukrut | SOPA Images | LightRocket | Getty Images

A lower sales forecast, slowing growth in China and a bottlenecked supply channel — the news coming out of Nike’s fiscal first-quarter earnings report wasn’t good.

Shares were down more than 6% on Friday afternoon following the report. Ahead of the results, shares had already tumbled roughly 9% from an all-time high of $174.38, which it hit in August.

Amid the sell-off some analysts see an opportunity for Nike to position its business — and its stock — for greater growth. Nike’s supply chain struggles are providing it with cover to accelerate its direct-to-consumer strategy, which has been a key driver of profitability in recent quarters.

It now takes Nike roughly 80 days to get goods from Asia to North America, which is double pre-pandemic transit times. Manufacturing facilities across Vietnam are beginning to reopen, but Nike has lost about 10 weeks of production due to pandemic shutdowns. About 43% of its total footwear and apparel units are made in the country.

For the next few quarters, Nike predicts consumer demand will outweigh supply. This means Nike will need to be much more strategic about where it’s stocking running shoes and workout tops. It will likely opt for its own stores, over wholesale partners.

“As long as inventory is constrained, it’s fair to assume the pivot to direct will be accelerated,” BMO Capital Markets analyst Simeon Siegel said. “They’re prioritizing their own channels with product first.”

Before the Covid pandemic struck, Nike was on a path to grow its direct-to-consumer business. It has been cutting partnerships with some wholesale retailers, while building its online business and opening Nike stores around the world. Over the past three years, Nike has pulled out of about 50% of its wholesale accounts.

Nike calls the transition a “consumer direct offense,” a play on sports terminology. In fiscal 2021, Nike’s direct revenue represented roughly 39% of sales for the Nike brand, up from 35% in the prior year. Selling more goods at full price has also been aiding profits. Nike’s gross margins for fiscal 2021 grew to 44.8%, from 43.4% in 2020.

Industrywide supply-chain havoc could accelerate Nike’s DTC push at an even faster clip and in turn drive profitability higher.

Nike ‘still has the demand’

“This means Nike now gets a free excuse to accelerate its DTC transition and say, ‘We don’t have the supplies to get to our wholesalers,'” said Stacey Widlitz, president of SW Retail Advisors, in an interview. “This is a major opportunity, because you’re seeing all of these other brands cut wholesale, but they don’t have the top line like Nike. Nike still has the demand.”

And even if Nike’s shelves are a bit bare in the coming months compared with normal times, Widlitz said, she doesn’t think it will permanently drive shoppers away to other retailers.

“People are always going to be drawn back to the big brands,” she said. “It’s the greatest pent-up demand, because they are basically telling the consumer, ‘You can’t have it right now.’ You’re creating FOMO [fear of missing out] by not having supply. It’s a no-brainer to take advantage of that.”

On Thursday’s earnings call, Nike’s management team said it is prioritizing its direct channels.

Nike’s top partners include Foot Locker, Dick’s Sporting Goods and Nordstrom, and investors in these stocks are concerned about what Nike’s troubles will mean for their businesses. On Friday, Foot Locker shares were down more than 6%, while Dick’s shares shed nearly 2%. Nordstrom’s stock was about flat.

Chief Financial Officer Matt Friend said temporary supply chain disruptions will “likely trigger an even greater acceleration in the transformation of the marketplace — toward Nike and our most important wholesale partners.”

“We’re going to have lean inventory,” he said. But he added, “Strong brands get stronger in this environment.”

And according to Citi analyst Paul Lejuez, a temporary supply chain problem is a much better issue to have than a demand problem. He doesn’t see Nike as having a demand problem.

“We view these supply chain disruptions as transitory … and [the delays] are impacting the athletic footwear space broadly,” Lejuez said in a research note. “The most significant impacts from Vietnam factory closures should happen post-holiday.”

Another way to shore up growth

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What executives said internally during GameStop short squeeze

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Vlad Tenev, CEO and Co-Founder of Robinhood, in his office on July 15, 2021 in Menlo Park, California.

Kimberly White | Getty Images Entertainment | Getty Images

Robinhood executives had a lot to talk about the week Reddit users were driving a historic short squeeze in GameStop.

New documents in a lawsuit allegedly show internal conversations between executives panicking over how to meet financial requirements, debating the severity of a Reddit-driven short squeeze and contradicting the CEO’s public statements.

Plaintiffs in the claim, which was filed in the U.S. District Court in the Southern District of Florida, allege they suffered damages when Robinhood enacted trading restrictions on Jan. 28 amid volatile activity in GameStop and other meme stocks. They are suing for damages, interest and attorneys’ fees. Plaintiffs are also seeking class action status.

“As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits,” the brokerage said in a Jan. 28 blog post addressing the trading restrictions. “Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment.”

According to the suit, in one instance, Robinhood Chief Operating Officer Gretchen Howard messaged internally that the start-up was facing a “major liquidity crisis.” Publicly, the company’s chief executive said the opposite.

“There was no liquidity problem,” CEO Vlad Tenev told CNBC’s Andrew Ross Sorkin a day later, on Jan. 29.

A Robinhood spokesperson said the start-up met its liquidity obligations on January 28, and “fully satisfied its clearinghouse deposit requirement before the market opened.”

Sharp rise in trading volume

Robinhood and other brokerage firms saw unprecedented trading volume in January around heavily shorted stocks, including GameStop and AMC. The brokerage start-up, which has to deposit money to a clearinghouse based on the volume of trades, said it restricted buying of certain securities because the firm was unable to meet deposit requirements. These requirements increase when volatility goes up in case of large losses by options trades.

“This clearing thing seems pretty scary to me — I would say this is our biggest fire right now,” Robinhood’s director of engineering allegedly said in a Slack message, adding that the company could see a margin call of hundreds of millions of dollars. “In the worst case scenario we max out our credit lines and they liquidate our positions.”

According to the suit, David Dusseault, chief operating officer of subsidiary Robinhood Financial, said the company was “to [sic] big for them to actually shut us down,” referring to the National Securities Clearing Corp., a provider of centralized clearing services. In the same conversation, another executive, whose name is redacted, said “we’re going to get crucified” for stopping trades, according to the complaint.

‘A tidal wave of volume and volatility’

The chats were part of the discovery process in a lawsuit against Robinhood. An attorney for the plaintiffs argued that Robinhood knew the Reddit-driven chaos was coming and didn’t do enough.

“Robinhood and its higher-ups were well aware of this tidal wave of volume and volatility that was heading in their direction,” Maurice Pessah, founder of Pessah Law Group, told CNBC. “In our opinion and as we allege in the lawsuit, they didn’t do their jobs and what they are required to do in terms of analyzing risks and managing risks as a broker.”

In response, Robinhood said it disputes the plaintiff allegations and stands by public statements regarding Jan. 28. A company spokesperson also said “the communications are consistent with Robinhood’s focus to take appropriate, incremental measures to mitigate risk.”

In another excerpt, data scientists and Tenev debated how intense the Reddit frenzy could get, according to the suit.

“Maybe I am being alarmist but I think we should consider all-hands on deck kind of situation and shuffle some priorities to deal with increasing volumes,” Robinhood’s director of engineering allegedly wrote. The company’s head of data science responded “you may not be being an alarmist” after seeing a chart showing the spike in volume, plaintiffs alleged.

“Today was a huge day. There are internal things that are starting to buckle under pressure,” another software engineer said, according to the suit.

Tenev allegedly responded that “only the paranoid survive.” His response to a comment that “one who panics first panics best” was “joy.”

In another message, the company acknowledged “blowback from this is going to be exponentially worse as time goes on” and they “were worried about the long term affects [sic] of this,” according to the suit.

In the months that followed these conversations, Robinhood’s CEO as well as the CEOs of Citadel and Melville Capital testified in front of Congress. Tenev told the representatives that the GameStop mania was a 1 in 3.5 million event, which he called “unmodelable” and that Robinhood’s risk management processes kicked in as they were meant to. In order to meet capital requirements and shore up its balance sheet, Robinhood raised more than $3.4 billion in a matter of days.

The company went on to a blockbuster public listing in August.

Securities and Exchange Commission Chair Gary Gensler is expected to publish a report on the GameStop saga in the coming weeks, as well as recommendations on what, if any, changes should be made to the U.S. trading system as a result.

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Apple told a showbiz union it had less than 20 million TV+ subscribers

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Tim Cook, chief executive officer of Apple Inc., smiles while speaking about Apple TV+ during an event at the Steve Jobs Theater in Cupertino, California, U.S., on Tuesday, Sept. 10, 2019.

David Paul Morris | Bloomberg | Getty Images

Apple claimed its TV+ service had less than 20 million subscribers in the U.S. and Canada as of July, allowing it to pay behind-the-scenes production crew lower rates than streamers with more subscriptions, according to the International Alliance of Theatrical Stage Employees, a union that represents TV and movie workers who perform jobs like operating cameras and building sets.

Apple has never revealed subscriber numbers for its Apple TV+ streaming service, which launched in the fall of 2019. Analysts are reluctant to offer estimates, but many say that its scale pales in comparison to services like Netflix, which claimed 209 million subscribers as of Q2, and Disney+, which claimed 116 million.

The fact that Apple can pay a discounted rate despite being the most valuable publicly traded company in the world highlights some of the issues facing Hollywood workers as streaming supplants linear TV and movies, and is raising ire among union members who are deciding whether to strike for better pay and working conditions.

Under the current contract, high-budget productions intended for streaming can offer lower rates to workers if the streaming service has less than 20 million subscribers in the U.S. and Canada, which is determined on July 1 every year. Apple told IATSE that it had less than 20 million subscribers, a union spokesman said.

The union is currently in negotiations with the Alliance of Motion Picture and Television Producers over a new contract. Apple is a member of the alliance, but the alliance negotiates for all of its members, and doesn’t create carve-outs for specific companies, according to a spokesperson for the industry group.

An Apple spokesperson declined to comment on subscriber numbers but said the company pays rates in line with leading streaming services.

Under the current contract, productions made for streaming services are governed under less strict labor terms than traditional TV shows or movies because streaming profitability is “presently uncertain” and productions needed greater flexibility, according to a copy of the contract reviewed by CNBC.

But union leaders argue that streaming is no longer a particularly new form of media, and companies that bankroll streaming productions should pay rates closer to traditional media productions.

“Workers on certain ‘new media’ streaming projects get paid less, even on productions with budgets that rival or exceed those of traditionally released blockbusters,” an IATSE press release said this week, noting that negotiations had stalled.

IATSE is gearing up for a strike, its spokesman said, and ballots allowing the union’s 150,000 members to authorize a strike will be sent out on October 1.

While new media pay rates are one of the issues currently under negotiation, the most pressing issue is working conditions on set, including long working hours, which have gotten worse during the Covid-19 pandemic, the union spokesperson said. Celebrities and actors have started to post messages on social media supporting the IATSE union and potential strike.

Apple has reportedly spent up to $15 million per episode of shows like “The Morning Show” to try and bulk up its service with premium content. Apple also bundled free trials with the purchase of new phones or tablets, and those trials started expiring in July, forcing many users to decide whether it was worth $4.99 per month. Apple sold an estimated 206 million iPhones globally in 2020, which would amount to a lot of free trials.

NBCUniversal’s Peacock and ViacomCBS’ Paramount+ also have under 20 million subscribers, allowing them to ask for discounts on labor, the union spokesman said.

A ViacomCBS spokesperson said the company doesn’t break out Paramount+ streaming numbers. NBCUniversal didn’t have a comment by publication time.

Disclosure: NBCUniversal, which owns and operates Peacock, is also the parent company of CNBC.

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