The cryptocurrency exchange Coinbase said on Thursday that its quarterly profit soared by more than 20 times from a year earlier as its revenue skyrocketed, in a sign of how enthusiasm for digital currencies has gone mainstream in the pandemic.
Coinbase said it brought in $1.8 billion in revenue during the first three months of the year, up from $191 million in the same period a year ago. Profits jumped to $771 million from $32 million. It was the company’s first earnings report since it went public last month.
But Coinbase also offered a cautionary note, saying that rivals were swarming the market and increasing competition. The company has been spending heavily on marketing and development to keep ahead of its competitors.
“The rapid expansion of the cryptoeconomy also creates challenges for Coinbase,” it said in a letter to shareholders. “We also have to continue to move quickly to address them, and that inspires us toward action and growth.”
Coinbase, one of the world’s largest cryptocurrency enterprises, was valued at $85 billion last month when it went public. Its listing was a major milestone for an industry that had long been derided as too risky or unsafe for mainstream investors. Coinbase makes it easy for customers to buy and sell digital currencies like Bitcoin, and it takes a cut of each transaction.
Bitcoin and other digital currencies have surged in value in recent months as buyers have found new uses for the assets and as a wave of market manias have gripped the financial world during the pandemic. That surge has also driven growth and profits for Coinbase. It said Thursday that 56 million people were verified on its platform, up from 34 million a year earlier.
But Coinbase’s share price has dropped as cryptocurrencies have fallen from their highs and its market capitalization now stands at $53 billion. On Wednesday, Elon Musk, chief executive of Tesla and a vocal cryptocurrency supporter, tweeted that Tesla would stop accepting Bitcoin as payment for cars, citing environmental reasons, and Bitcoin’s value dropped. One Bitcoin was worth under $50,000 on Thursday, down from more than $63,000 in mid-April.
Coinbase has also faced criticism as it has grown. Customers have said the company has ignored their pleas for help when their digital fortunes were stolen or when they were locked out of their accounts. Current and former employees have also said Coinbase has treated Black and women employees unfairly.
This week, Coinbase said it was increasing compensation for its employees as it tried to stay competitive and reduce uncertainty. Employees will no longer negotiate for salaries when starting at the company, which “can disproportionately leave women and underrepresented minorities behind,” it said in a blog post.
In a call with investors on Thursday, Coinbase executives said they were trying to balance growing the company quickly with being cautious about security and legal risks.
Brian Armstrong, Coinbase’s co-founder and chief executive, acknowledged that some competitors offered a greater variety of digital currencies to buy and sell, saying, “There’s no doubt that we need to accelerate the process by which we review assets.” He promised that Dogecoin, the popular currency that started as a joke, would be available to trade on Coinbase in six to eight weeks.
Lower programming costs at traditional television networks and improved results at Hulu and ESPN+ contributed to $912 million in quarterly profit at the Walt Disney Company, a result that was dramatically better than Wall Street analysts had predicted.
But growth at Disney’s flagship streaming service fell short of expectations, and Disney’s theme parks had another $400 million in operating losses. Disney shares fell about 4 percent in after-hours trading on Thursday.
The Disney+ streaming service now has about 104 million subscribers worldwide, the company said. (Analysts had been hoping for 110 million.) Hulu has about 42 million subscribers, up 30 percent from a year ago. About 14 million people now pay for access to the company’s sports-oriented ESPN+ platform, up 75 percent.
Disney’s direct-to-consumer unit continued to suffer losses, though not as steep as a year ago: $300 million in the quarter that ended on April 3 from $800 million last year.
“We’re pleased to see more encouraging signs of recovery across our businesses, and we remain focused on ramping up our operations while also fueling long-term growth,” Bob Chapek, Disney’s chief executive, said in a statement.
Profit in the most recent quarter, the second in Disney’s fiscal year, totaled $912 million, a 95 percent increase from a pandemic-battered $475 million a year earlier. Excluding one-time items, per-share profit rose 32 percent, to 79 cents from 60 cents.
Revenue was $15.6 billion, a 13 percent decline from a year ago.
Operating income at Disney’s traditional television business — which includes ESPN, ABC, Disney Channel, FX, Freeform and National Geographic — reached $2.8 billion in the quarter, a 15 percent increase. Disney attributed the improved results to lower programing costs and higher fees from cable distributors (based on multiyear contracts). A decrease in costs at ABC was primarily because of the timing of the Academy Awards, which aired later than in years past because of the pandemic.
Colonial Pipeline paid its extortionists roughly 75 Bitcoin, or nearly $5 million, to recover its stolen data, according to people briefed on the transaction.
The payment came after cybercriminals last week held up Colonial Pipeline’s business networks with ransomware, a form of malware that encrypts data until the victim pays, and threatened to release it online. Colonial Pipeline pre-emptively shut down its pipeline operations to keep the ransomware from spreading and because it had no way to bill customers with its business and accounting networks offline.
The shutdown of the company’s network, which includes 5,500 miles of pipeline that supplies nearly half the gas, diesel and jet fuel to the East Coast, triggered a cascading crisis that led to emergency meetings at the White House, a jump in gas prices, panic buying at the gas pumps, and forced some airlines to make fuel stops on long-haul flights.
The ransom payment was first reported by Bloomberg. A spokeswoman for Colonial declined to confirm or deny that the company had paid a ransom.
President Biden also declined to answer whether Colonial Pipeline had paid its extortionists in a press briefing on Thursday. He did not rule out the possibility that the administration would target the cybercriminals, a ransomware outfit called DarkSide, with a retaliatory strike. He said the United States would pursue “a measure to disrupt their ability to operate.”
Jen Psaki, the White House press secretary, said in a separate briefing, “It’s the recommendation of the F.B.I. to not pay ransom in these cases,” because it can incentivize cybercriminals to conduct more attacks. She added that “private sector entities or companies are going to make their own decisions.”
DarkSide has tried to distance itself from politics. In a statement on its website, the group said it tried to avoid being political — an effort perhaps to thwart a pre-emptive strike by the United States, which took a major ransomware conduit offline last year to head off an attack on the 2020 election.
It has taken several days for Colonial to begin bringing its pipeline back online, a process that officials said would take time. Mr. Biden encouraged Americans not to panic-buy gas and warned gas companies to refrain from price gouging.
“This is not like flicking on a light switch,” he said, noting that Colonial’s pipeline had never before been shut down.
Colonial has not shared many details about the incident, or why it was necessary to shut down the pipeline, which other operators sequester from their business operations for safety. Cybersecurity experts have said the attack and its fallout demonstrated a lack of cyber resilience and planning.
Kim Zetter, a cybersecurity journalist, first reported that Colonial had shut down its pipeline partly because its billing systems were taken offline and it had no way to charge customers.
Many organizations across the United States, including police departments, have opted to pay their ransomware extortionists rather than suffer the loss of critical data or incur the costs of rebuilding computer systems from scratch.
In a separate ransomware attack on the Washington, D.C., Metropolitan Police Department, hackers said the price the police offered to pay was “too small” and dumped 250 gigabytes of the department’s data online this week, including databases that track gang members and social media preservation requests.
“This is an indicator of why we should pay,” the cybercriminals, called Babuk, said in a post online. “The police also wanted to pay us, but the amount turned out to be too small. Look at this wall of shame,” they wrote, “you have every chance of not getting there. Just pay us!”
Gasoline prices continued to rise across the Southeast on Thursday, but at a slower pace generally than in recent days, as the operator of Colonial Pipeline said it had made “substantial progress” in resuming the delivery of fuel along the East Coast.
“Product delivery has commenced to all markets we serve,” the pipeline’s operator said Thursday afternoon. “It will take several days for the product delivery supply chain to return to normal. Some markets served by Colonial Pipeline may experience, or continue to experience, intermittent service interruptions.”
The pipeline, which stretches from Texas to New Jersey and delivers nearly half of the transport fuels for the Atlantic Coast, was shut down because of a ransomware cyberattack on Friday. Operations have gathered momentum since the pipeline partially restarted late Wednesday.
Gasoline prices rose by roughly 3 cents in South Carolina and Georgia from Wednesday to Thursday, about half the amount of the increases of the previous few days. But prices in Tennessee, which depends on an offshoot of the pipeline, rose by 6 cents, to $2.87 for a gallon of regular. Nationwide, the average price for a gallon of regular increased by 2 cents to $3.03, according to the AAA auto club.
Gasoline supplies vary from state to state along the pipeline, in part because some places have more storage than others. In New Jersey, only 1 percent of gasoline stations lacked fuel early Wednesday morning, while more than half of the stations in Virginia, North Carolina and South Carolina were out of fuel, according to GasBuddy, an app that monitors fuel supplies.
It is likely to take at least through the weekend for supply at all gasoline stations to return to normal functioning, because it takes time for fuel to pass through the pipeline.
President Biden, speaking on national television, urged motorists not to panic.
“They should be reaching full operational capacity as we speak, as I speak to you right now,” Mr. Biden said at the White House. “That is good news. But we want to be clear, we will not feel the effects at the pump immediately. This is not like flicking on a light switch.”
An internal assessment by the Departments of Energy and Homeland Security noted that the fuel “travels through the pipeline at 5 miles per hour” and would take “approximately two weeks to travel from the Gulf Coast to New York.” Supplemental supplies transported in tanker trucks and tanker vessels connecting the Gulf and Atlantic coasts also can take up to a week or more.
The Biden administration has temporarily eased the Jones Act, which prohibits foreign vessels from delivering goods from one domestic port to another. The administration said Thursday that a waiver had been granted to one company and that it would consider other waiver requests.
“This waiver will enable the transport of additional gas and jet fuel to ease supply constraints,” Jen Psaki, the White House press secretary, said in a statement. The Jones Act, which is over a century old and is designed to protect American shipping, is usually waived to compensate for supply interruptions during hurricanes.
Panic buying contributed to the fuel shortages. At some stations, people were filling up gasoline cans, forcing others to wait longer and causing shouting matches. Lines of 20 to 25 cars waited were seen at the few stations operating in Chapel Hill, N.C., where almost all the gas stations lacked fuel.
Friday is traditionally the biggest day for gasoline sales. But energy analysts were optimistic that the crisis would soon pass.
“The restart of the pipeline is very positive news for motorists,” said Jeanette McGee, the director for external communications for AAA. “While impact won’t be seen immediately and motorists in affected areas can expect to see a few more days of limited fuel supply, relief is coming.”
She said station pumps will be full in “several days,” ahead of the Memorial Day weekend, a heavy driving time.
The Federal Bureau of Investigation has identified an organized crime group called DarkSide as the attacker. The group is believed to operate from Eastern Europe, possibly Russia. While the attack was not on the pipeline itself, Colonial shut down both its information systems and the pipeline until it was sure it could safely manage the flow of fuel.
David E. Sanger and Michael D. Shear contributed reporting.
Ralph Lauren said on Thursday that it was selling its Club Monaco chain to a private-equity firm as it focused on its namesake business.
The chain will be acquired by Regent LP for an undisclosed amount, the retailer said in a statement. Ralph Lauren said in its annual report last May that it had about 70 Club Monaco stores in North America, and described the chain, which was founded in 1985, as “a modern, urban-minded brand with an element of ease and a spark of entrepreneurship.”
Ralph Lauren’s spinoff of Club Monaco follows its plan to license its Chaps brand. Apparel retailers, which faced a difficult 2020 because of the pandemic, appear to be honing in on their main brands and selling off smaller businesses. Recently, Gap, the owner of its namesake chain, Old Navy and Athleta, said that it would sell its Intermix and Janie and Jack brands to focus on its core businesses.
With new claims for unemployment benefits inching down, a growing number of Republican governors around the country have announced they are withdrawing from an array of federal pandemic-related jobless benefits.
About 487,000 workers filed first-time claims for state benefits last week, the Labor Department said on Thursday, a decrease from 514,000 the week before. In addition, about 104,000 new claims were filed for Pandemic Unemployment Assistance, a federal program covering freelancers, part-timers and others who do not routinely qualify for state benefits. Those figures are not seasonally adjusted.
After more than a year of being whipsawed by the pandemic, the economy has been showing new life. Restrictions are lifting, businesses are reopening, and job listings are on the upswing. But hiring in April was weaker than expected.
“Over all, jobless claims are about three times as high as they were pre-Covid, but they’re coming down” said Heidi Shierholz, senior economist at the left-leaning Economic Policy Institute.
The labor market’s slow recovery from the staggering losses wreaked by the pandemic is breeding frustration and uncertainty.
Some employers, particularly in the restaurant and hospitality sectors, have complained of having trouble finding workers. The U.S. Chamber of Commerce and many Republicans have argued that a temporary $300-a-week federal unemployment supplement has made workers reluctant to return to the job.
As of Thursday, Republican governors in 14 states had announced that they planned to terminate a network of federal pandemic-related unemployment benefits ahead of the Sept. 6 expiration date. The states are Alabama, Arkansas, Georgia, Idaho, Iowa, Mississippi, Missouri, Montana, North Dakota, South Carolina, South Dakota, Tennessee, Utah and Wyoming.
“With the nation’s lowest unemployment rate at 2.9 percent and plenty of good paying jobs available today, it makes sense to transition away from these extra benefits that were never intended to be permanent,” Gov. Spencer J. Cox of Utah said Wednesday.
In most cases, withdrawal would mean an end not only to the weekly supplements, but also to Pandemic Unemployment Assistance and to extended benefits for those who had exhausted other state and federal jobless insurance.
Economists are skeptical that supplemental jobless benefits are playing anything more than a bit part in the pace of the job market’s recovery.
“There is tremendous churn in this labor market,” said Gregory Daco, chief U.S. economist at Oxford Economics. “There are still major supply constraints and unemployment benefits are not the most important one. The virus is.”
Many workers have children at home who are not attending school in person. Others are wary of returning to jobs that require face-to-face encounters. Covid-19 infections have decreased since September, but there are still 38,000 new cases being reported each day and 600 Covid-related deaths. Less than half the population is fully vaccinated.
There is halting progress from employers as well, as businesses continually update their assessment of costs and customer demand. “The hiring pattern isn’t going to be smooth,” Mr. Daco said. “Businesses hire and then reassess. They need to find the right balance. It’s a trial-and-error process more than anything.”
Prematurely halting federal jobless benefits is “detrimental to the economy,” Mr. Daco said. “You’re voluntarily hurting certain vulnerable tranches of the population.”
Mississippi, Tennessee and Alabama are among the states that offer the lowest maximum benefit to qualified individuals — $275 or less each week. Nationwide, the average weekly benefit without federal supplements is $387, according to the Center for Budget and Policy Priorities.
There are 8.2 million fewer jobs than in February 2020, and last month the unemployment rate was 6.1 percent. Of the states that have announced they are pulling out of the pandemic jobless programs, only Mississippi has a rate that is higher than the national average. It was 6.3 percent in March, the latest month for which it is available.
Reporting was contributed by Brillian Bao, Laney Pope, John Yoon and Alex Lemonides.
Elon Musk has been a big cryptocurrency booster of late, even directing Tesla to buy $1.5 billion in Bitcoin for its corporate treasury earlier this year. On Thursday, he abruptly reversed course, tweeting that Tesla would stop accepting Bitcoin as payment for cars, citing environmental reasons.
“We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel,” he said.
Bitcoin’s price promptly plunged by more than 10 percent, and Tesla’s shares dropped more than 4 percent, but recovered when trading began on Thursday.
Tesla said it would begin accepting the cryptocurrency a few months ago, when it also revealed a billion-dollar Bitcoin buy, pushing the price up by more than 10 percent. Bitcoin seems remarkably sensitive to the billionaire’s tweets. “If one person can dramatically alter spending power, the ‘stable store of value’ criteria of a currency is not met,” Paul Donovan of UBS wrote in a note to clients on Thursday.
Mining Bitcoin is energy-intensive, and the more it is worth, the more power it takes a network of computers to create the tokens, by design. Bitcoin’s climate problem is hardly a secret. The DealBook newsletter asks: What gives?
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Tesla only started accepting Bitcoin for car purchases in the United States in March. Just over two weeks ago, Zach Kirkhorn, Tesla’s chief financial officer, told investors that “it is our intent to hold what we have long term and continue to accumulate Bitcoin from transactions from our customers as they purchase vehicles.” He described the rationale for buying and accepting Bitcoin as “Elon and I were looking for a place to store cash that wasn’t being immediately used, trying to get some level of return.”
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An entry-level Tesla is worth about one Bitcoin, so the company’s $1.5 billion Bitcoin purchase in February far surpasses the amount of crypto it would collect from car sales for a very long time. That raises questions about the vetting and approval process for that investment, which may worry E.S.G. investors, who otherwise look favorably at an electric vehicle company. Did Mr. Musk not know about Bitcoin’s environmental impact until now? Who advised him on it? Did climate factor into the board’s approval process?
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SpaceX’s rockets are massive carbon emitters. The Boring Company, his tunnel drilling endeavor, has also faced criticism about its environmental impact.
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Mr. Musk’s statement said that “Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy.” We’ll see whether it made any recent trades when it reports second-quarter results in July. Given the impact that Mr. Musk’s tweet had on Bitcoin’s price, any action just before or after will be scrutinized.
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The return policy for cars bought with Bitcoin worked in Tesla’s favor, stipulating that buyers get back Bitcoin if it’s worth less than the equivalent dollar value at purchase but get back dollars if Bitcoin is worth more. That raises many issues, including accounting risks and worries about warranties and other consumer protection laws.
Mr. Musk can be an unreliable narrator. On Tuesday, he asked his followers on Twitter if Tesla should accept Dogecoin, the jokey cryptocurrency. (Most said yes.) On Sunday, he announced that SpaceX had taken Dogecoin as payment for shuttling a satellite to the moon. And as host of “Saturday Night Live,” he said that cryptocurrency was both “the future of currency” and “a hustle.”
U.S. stocks rebounded on Thursday following a sell-off in European and Asian equities after faster-than-expected inflation data in the United States rattled markets the previous day.
The S&P 500 gained 1.2 percent, after a 4 percent drop over the first three days of the week. The Nasdaq composite gained 0.7 percent but is still down 4.6 percent for the week.
The Stoxx Europe 600 index closed 0.1 percent lower. The Nikkei 225 slumped 2.5 percent in Japan, and the Hang Seng in Hong Kong dropped 1.8 percent.
The U.S. Consumer Price Index, a measure of inflation, climbed 4.2 percent in April from a year earlier, data released on Wednesday showed. It was the fastest pace of increase since 2008. From March to April, prices increased 0.8 percent; economists surveyed by Bloomberg only forecast a 0.2 percent increase.
On Thursday, the U.S. Labor Department reported that the Producer Price Index, a measure of wholesale prices, rose 0.6 percent in April.
The yield on 10-year Treasury notes held fell to 1.67 percent. It had jumped seven basis points, or 0.07 percentage points, on Wednesday.
Federal Reserve policymakers have said that they expect the current increase in inflation to be transitory and would not set off a pullback in monetary stimulus. But the increase in April’s inflation reading, beyond what other analysts forecast, has some traders testing this view.
Commodities
Oil prices fell on Thursday after Colonial Pipeline said it had begun to restart operations along its massive pipeline, which transports gasoline, diesel and jet fuel from Texas to New Jersey. West Texas Intermediate, the U.S. benchmark, dropped 3.4 percent to $63.82 a barrel.
Cryptocurrencies
Bitcoin prices fell 11 percent to below $49,000, according to CoinDesk, after Elon Musk said Tesla would stop accepting the cryptocurrency as payment for its electric cars. Mr. Musk citing concerns about the energy consumption used in mining for Bitcoin, a longstanding issue. Tesla’s share price fell 3.1 percent, its fourth consecutive session of declines.
Most other cryptocurrencies fell on Thursday with CoinMarketCap valuing the global market at $2.2 trillion, down nearly 10 percent from the day before.
Shares in Coinbase, an exchange for people and companies to buy and sell various digital currencies, dropped 6.5 percent.
China’s landmark $2.8 billion antitrust penalty against Alibaba caused the e-commerce giant to report a loss in the latest quarter, its first since going public seven years ago. But sales continued to grow despite the regulatory scrutiny, helped by China’s strong economic expansion.
Alibaba recorded an operating loss of $1.2 billion for the first three months of the year, the company said on Thursday. Without the antitrust fine, operating profits would have been $1.6 billion, a 48 percent increase from a year earlier, the company said.
Revenue for the quarter grew by nearly two-thirds from a year before, to $28.6 billion. That figure got a boost because Alibaba began including the sales of Sun Art, a supermarket operator in which the company took a controlling stake last October.
China is on a regulatory blitz to curtail what officials describe as unfair and monopolistic business practices by the country’s internet heavyweights. The fine last month against Alibaba was followed swiftly by the opening of an antitrust investigation into Meituan, a food-delivery platform that is among China’s most valuable internet companies.
Two days after China’s market regulator announced the fine against Alibaba, which the agency said was for illegally restricting the vendors on its shopping sites, the company said it would lower the fees it charges those merchants and invest in new services for them.
Speaking to analysts on Thursday, Alibaba’s chief executive, Daniel Zhang, pledged to put “all of our incremental profits this year” toward helping merchants lower their operating costs, expanding in new business areas such as brick-and-mortar grocery and improving technology. But Mr. Zhang also stressed that these investments would be “highly targeted and disciplined.”
For the 12 months that ended in March, Alibaba recorded $109.5 billion in revenue, an increase of 41 percent over the year before. The company’s Chinese retail platforms attracted 811 million active consumers during that period.
Today in the On Tech newsletter, Shira Ovide writes that Amazon and Apple preach obsessions with doing the best things for customers, but their advertising businesses aren’t really about us at all.