Tag Archives: TECH08

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Wall Street surges, powered by tech rebound

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  • Baker Hughes falls on missing Q4 profit estimates
  • Activist investor Elliott Management takes stake in Salesforce
  • Chips on track for biggest daily gain since Nov
  • Indexes up: Dow 0.98%, S&P 1.41%, Nasdaq 2.09%,

NEW YORK, Jan 23 (Reuters) – Wall Street surged on Monday, led higher by technology stocks as investors embarked on an earnings-heavy week with a renewed enthusiasm for market leading momentum stocks that were battered last year.

All three major stock indexes extended Friday’s rally, gaining momentum as the day progressed. The tech-heavy Nasdaq was out front, boosted by a 4.9% jump in semiconductor shares (.SOX).

“This is a remarkable rally in many of the names that did badly last year,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. “No one wants to be watching from the sideline with a bunch a cash as the market gets away from them.”

The session marks a calm before the storm in a week jam-packed with high profile earnings reports and back-end loaded with crucial economic data.

Investors are all but certain the Federal Reserve implement a bite-sized interest rate hike next week even as the U.S. central bank remains committed to taming the hottest inflationary cycle in decades.

Financial markets have priced in a 99.8% likelihood of a 25 basis point hike to the Fed funds target rate at the conclusion of its two-day monetary policy meeting next Wednesday, according to CME’s FedWatch tool.

The Dow Jones Industrial Average (.DJI) rose 328.17 points, or 0.98%, to 33,703.66, the S&P 500 (.SPX) gained 55.93 points, or 1.41%, to 4,028.54 and the Nasdaq Composite (.IXIC) added 232.84 points, or 2.09%, to 11,373.28.

All 11 major sectors in the S&P 500 were higher, with tech (.SPLRCT) up the most, jumping 2.8%.

Fourth-quarter reporting season has shifted into overdrive, with 57 of the companies in the S&P 500 having posted results. Of those, 63% have delivered better than expected earnings, according to Refinitiv.

Analysts now see S&P 500 fourth quarter earnings, on aggregate, dropping 3% year-on-year, nearly twice as steep as the 1.6% annual drop seen at the beginning of the year, per Refinitiv.

This week, Microsoft Corp (MSFT.O) and Tesla Inc , along with a spate of heavy-hitting industrials including Boeing CO (BA.N), 3M Co (MMM.N), Union Pacific Corp (UNP.N) Dow Inc (DOW.N), Northrop Grumman Corp (NOC.N), are expected to post quarterly results.

Tesla Inc (TSLA.O) surged 7.8% as Chief Executive Elon Musk took the stand in his fraud trial related to a tweet saying he had backing to take the electric automaker private.

Baker Hughes Co (BKR.O) missed quarterly profit estimates due to inflation pressures and ongoing disruptions due to Russia’s war on Ukraine. The oilfield services company’s shares were off 0.9%.

Cloud-based software firm Salesforce Inc (CRM.N) jumped 3.1% following news that activist investor Elliot Management Corp has taken a multi-billion dollar stake in the company.

Spotify Technology SA (SPOT.N) joined the growing list of tech-related companies to announce impending job cuts, shedding 6% of its workforce as rising interest rates and the looming possibility of recession continue to pressure growth stocks. The music streaming company’s shares rose 2.1%.

On the economic front, the Commerce Department is expected to unveil its initial “advance” take on fourth-quarter GDP in Thursday, which analysts expect to land at 2.5%.

On Friday, the wide-ranging personal consumption expenditures (PCE) report is due to shed light on consumer spending, income growth, and crucially, inflation.

Advancing issues outnumbered declining ones on the NYSE by a 3.53-to-1 ratio; on Nasdaq, a 1.95-to-1 ratio favored advancers.

The S&P 500 posted 11 new 52-week highs and no new lows; the Nasdaq Composite recorded 66 new highs and 14 new lows.

Reporting by Stephen Culp; Additional reporting by Shreyashi Sanyal and Johann M Cherian in Bengaluru
Editing by Marguerita Choy

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Spotify to trim 6% of workforce in latest tech layoffs

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Jan 23 (Reuters) – Spotify Technology SA (SPOT.N) said on Monday it plans to cut 6% of its workforce and would take a related charge of up to nearly $50 million, adding to the massive layoffs in the technology sector in preparation for a possible recession.

The tech industry is facing a demand downturn after two years of pandemic-powered growth during which it had hired aggressively. That has led firms from Meta Platforms Inc (META.O) to Microsoft Corp (MSFT.O) to shed thousands of jobs.

“Over the last few months we’ve made a considerable effort to rein in costs, but it simply hasn’t been enough,” Chief Executive Daniel Elk said in a blog post announcing the roughly 600 job cuts.

“I was too ambitious in investing ahead of our revenue growth,” he added, echoing a sentiment voiced by other tech bosses in recent months.

Spotify’s operating expenditure grew at twice the speed of its revenue last year as the audio-streaming company aggressively poured money into its podcast business, which is more attractive for advertisers due to higher engagement levels.

Reuters Graphics

At the same time, businesses pulled back on ad spending on the platform, mirroring a trend seen at Meta and Google parent Alphabet Inc (GOOGL.O), as rapid interest rate hikes and the fallout from the Russia-Ukraine war pressured the economy.

The company, whose shares rose 5.8% to $103.55, is now restructuring itself in a bid to cut costs and adjust to the deteriorating economic picture.

It said Dawn Ostroff, the head of content and advertising, was leaving after an over four-year stint at the company. Ostroff helped shape Spotify’s podcast business and guided it through backlash around Joe Rogan’s show for allegedly spreading misinformation about COVID-19.

The company said it is appointing Alex Norström, head of the freemium business, and research and development boss Gustav Söderström as co-presidents.

Spotify had about 9,800 full-time employees as of Sept. 30.

($1 = 0.9196 euros)

Reporting by Eva Mathews in Bengaluru; Editing by Sherry Jacob-Phillips and Shailesh Kuber

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Feds seized nearly $700 million from FTX founder Bankman-Fried

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Jan 20 (Reuters) – Federal prosecutors have seized nearly $700 million in assets from FTX founder Sam Bankman-Fried in January, largely in the form of Robinhood stock, according to a Friday court filing.

Bankman-Fried, who has been accused of stealing billions of dollars from FTX customers to pay debts incurred by his crypto-focused hedge fund, has pleaded not guilty to fraud charges. He is scheduled to face trial in October.

The Department of Justice revealed the seizure of Robinhood shares earlier this month, but it provided a more complete list of seized assets Friday, including cash held at various banks and assets deposited at crypto exchange Binance.

The ownership of the seized Robinhood shares, valued at about $525 million, has been the subject of disputes between Bankman-Fried, FTX, and bankrupt crypto lender BlockFi.

The most recent asset seizure reported by the DOJ took place on Thursday, when prosecutors seized $94.5 million in cash from an account at Silvergate Bank which was associated with FTX Digital Markets, FTX’s subsidiary in the Bahamas. The DOJ seized more than $7 million from other Silvergate accounts associated with Bankman-Fried and FTX.

The DOJ previously seized nearly $50 million from an FTX Digital Markets account at Moonstone Bank, a small bank in Washington state.

DOJ also said that assets in three Binance accounts associated with Bankman-Fried were subject to criminal forfeiture, but did not provide an estimate of the value in those accounts.

Reporting by Dietrich Knauth; Editing by Noeleen Walder and Daniel Wallis

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Amazon’s AWS to invest $35 bln in Virginia

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WASHINGTON, Jan 20 (Reuters) – Amazon.com Inc’s (AMZN.O) cloud services division said Friday it plans to invest another $35 billion by 2040 to expand data centers in Virginia.

Amazon Web Services (AWS) said the new investment will create 1,000 jobs. Virginia Republican Governor Glenn Youngkin said AWS will establish multiple data center campuses across Virginia.

In 2021, AWS said from 2011 to 2020 it had invested $35 billion in data centers located in northern Virginia and had 3,500 full time employees at its data centers in the state.

Pending approval by state lawmakers, Virginia is developing a new “Mega Data Center Incentive Program,” which would allow the company to receive up to a 15-year extension of Data Center Sales and Use tax exemptions on equipment and software.

AWS also will be eligible to receive a state grant of up to $140 million “for site and infrastructure improvements, workforce development, and other project-related costs.”

Amazon shares closed up 3.8% Friday.

Amazon in 2018 after a long contest announced northern Virginia would be home to its second headquarters known as “HQ2” and eventually employ more than 25,000 employees. As of April, Amazon said its headcount assigned to the site was around 5,000.

Youngkin has faced some criticism for withdrawing from a competition to attract a new Ford Motor (F.N) battery plant expected to be built with China’s Contemporary Amperex Technology Co Ltd (CATL) (300750.SZ), the world’s largest battery producer.

Youngkin defended his decision Friday, telling Bloomberg News that he looks “forward to bringing a great company there. It won’t be one that uses kind of a Trojan-horse relationship with the Chinese Communist Party in order to gain.”

A spokesperson for Youngkin has said that “while Ford is an iconic American company, it became clear that this proposal would serve as a front for the Chinese Communist party.”

Ford declined to comment on Youngkin’s decision to withdraw.

In July, Ford said it plans to localize 40 GWh of battery capacity in North America starting in 2026. It also announced CATL would provide battery packs for Mustang Mach-E models for North America starting in 2023 and would discuss cooperation for batteries in Ford vehicles around the world.

“Our talks with CATL continue – and we have nothing new to announce on either front,” Ford said.

Michigan is also a candidate for the Ford battery plant, sources said, and a decision could be made in the coming weeks.

Reporting by David Shepardson and Akash Sriram in Bengaluru; Editing by Aurora Ellis and Himani Sarkar

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Crypto lending unit of Genesis files for U.S. bankruptcy

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Jan 20 (Reuters) – The lending unit of crypto firm Genesis filed for U.S. bankruptcy protection on Thursday, owing creditors at least $3.4 billion, after being toppled by a market rout along with the likes of exchange FTX and lender BlockFi.

Genesis Global Capital, one of the largest crypto lenders, froze customer redemptions on Nov. 16 after the collapse of major exchange FTX sent shockwaves through the crypto asset industry, fuelling concern that other companies could implode.

Genesis is owned by venture capital firm Digital Currency Group (DCG).

Its bankruptcy filing is the latest in a string of crypto failures triggered by a market collapse that wiped about $1.3 trillion off the value of crypto tokens last year. While bitcoin has rallied so far in 2023, the impact of the market collapse has continued to hit companies in the highly interconnected sector.

The bankruptcy “doesn’t come as a shock to the markets,” said Ivan Kachkovski, currency and crypto strategist at UBS. “It remains to be seen if the chain effect would go on.”

“However, given that the funds have already been frozen for over two months and no other large crypto company reported an associated weakness, it’s likely that the contagion would be limited.”

Genesis’ lending unit said it had both assets and liabilities in the range of $1 billion to $10 billion, and estimated it had more than 100,000 creditors in its filing with the U.S. Bankruptcy Court for the Southern District of New York.

Genesis Global Holdco, the parent group of Genesis Global Capital, also filed for bankruptcy protection, along with another lending unit Genesis Asia Pacific.

Genesis Global Holdco said in a statement that it would contemplate a potential sale, or a stock-related transaction, to pay creditors, and that it had $150 million in cash to support the restructuring.

It added that Genesis’ derivatives and spot trading, broker dealer and custody businesses were not part of the bankruptcy process, and would continue their client trading operations.

CREDITORS’ CLAIMS

Genesis owes its 50 biggest creditors $3.4 billion, according to Reuters’ calculations from the bankruptcy filing. Its largest creditor is crypto exchange Gemini, which it owes $765.9 million. Gemini was founded by the identical twin cryptocurrency pioneers Cameron and Tyler Winklevoss.

Genesis was already locked in a dispute with Gemini over a crypto lending product called Earn that the two firms jointly offered to Gemini customers.

The Winklevoss twins have said Genesis owed more than $900 million to some 340,000 Earn investors. On Jan. 10, Cameron Winklevoss called for the removal of Barry Silbert as the chief executive of Digital Currency Group.

Representations of cryptocurrencies are seen in front of displayed decreasing stock graph in this illustration taken November 10, 2022. REUTERS/Dado Ruvic/Illustration

About an hour after the bankruptcy filing, Cameron Winklevoss tweeted that Silbert and Digital Currency Group continued to deny creditors a fair deal.

“Unless Barry (Silbert) and DCG come to their senses and make a fair offer to creditors, we will be filing a lawsuit against Barry and DCG imminently,” Winklevoss said in his tweet thread.

DCG did not immediately respond to a Reuters request for comment on the tweets.

Amsterdam-based crypto exchange Bitvavo, said in December it was trying to recover 280 million euros ($302.93 million) which it had lent to Genesis.

Bitvavo said in a blog post on Friday that talks on the repayment “have not yet led to an overall agreement that works for all parties concerned” and that it would continue to negotiate.

The bankruptcy filing “brings the process of negotiations to calmer waters,” Bitvavo said.

LENDING BUSINESS

Genesis brokered digital assets for financial institutions such as hedge funds and asset managers and had almost $3 billion in total active loans at the end of the third quarter, down from $11.1 billion a year earlier, according to its website.

Last year, Genesis extended $130.6 billion in crypto loans and traded $116.5 billion in assets, according to its website.

Its two biggest borrowers were Three Arrows Capital, a Singapore-based crypto hedge fund, and Alameda Research, a trading company closely affiliated with FTX, a source told Reuters. Both are in bankruptcy proceedings.

Three Arrows debt to Genesis was assumed by its parent company Digital Currency Group (DCG), which then filed a claim against Three Arrows. DCG’s portfolio companies also include crypto asset manager Grayscale and news service CoinDesk.

Crypto lenders, which acted as the de facto banks, boomed during the pandemic. But unlike traditional banks, they are not required to hold capital cushions. Earlier this year, a shortfall of collateral forced some lenders – and their customers – to shoulder large losses.

($1 = 0.9243 euros)

Reporting by Tom Hals in Wilmington, Delaware, Akanksha Khushi, and Elizabeth Howcroft in London; Editing by Lananh Nguyen, Clarence Fernandez, Kim Coghill, Ira Iosebashvili and Sharon Singleton

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Exclusive: Google parent to lay off 12,000 workers in latest blow to tech sector

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Jan 20 (Reuters) – Google’s parent Alphabet Inc (GOOGL.O) is eliminating about 12,000 jobs, or 6% of its workforce, the company said Friday, in the latest cuts to shake the technology sector.

Sundar Pichai, Alphabet’s CEO, said in a staff memo shared with Reuters that the company had rapidly expanded headcount in recent years “for a different economic reality than the one we face today.”

“I take full responsibility for the decisions that led us here,” he said.

The cuts come days after rival Microsoft Corp (MSFT.O) said it would lay off 10,000 workers.

Alphabet’s job losses affect teams across the company including recruiting and some corporate functions, as well as some engineering and products teams.

The layoffs are global and impact U.S. staff immediately.

Alphabet has already emailed affected employees, the memo said, while the process will take longer in other countries due to local employment laws and practices.

The news comes during a period of economic uncertainty as well as technological promise, in which Google and Microsoft have been investing in a burgeoning area of software known as generative artificial intelligence.

“I am confident about the huge opportunity in front of us thanks to the strength of our mission, the value of our products and services, and our early investments in AI,” Pichai said in the note.

Reuters was first to report the news.

Reporting by Jeffrey Dastin in Davos, Switzerland; Editing by Elaine Hardcastle and Alexander Smith

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T-Mobile says investigating data breach involving 37 mln accounts

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Jan 20 (Reuters) – T-Mobile (TMUS.O), the No.3 U.S. wireless carrier by subscribers, said on Thursday it was investigating a data breach involving 37 million postpaid and prepaid accounts and that it could incur significant costs related to the incident.

The company, which has more than 110 million subscribers, said it identified malicious activity on Jan. 5 and contained it within a day, adding that no sensitive data such as financial information was compromised.

However, some basic customer data — such as name, billing address, email and phone number — was obtained, and it had begun notifying impacted customers, said T-Mobile.

“Our investigation is still ongoing, but the malicious activity appears to be fully contained at this time, and there is currently no evidence that the bad actor was able to breach or compromise our systems or our network,” the company said.

The U.S. Federal Communications Commission (FCC) has opened an investigation into the data breach, the Wall Street Journal reported on Thursday, citing an FCC spokesperson.

FCC and T-Mobile did not immediately respond to Reuters’ requests for comment on the reported investigation.

“While these cybersecurity breaches may not be systemic in nature, their frequency of occurrence at T-Mobile is an alarming outlier relative to telecom peers,” said Neil Mack, senior analyst for Moody’s Investors Service.

“It could negatively impact customer behavior, cause churn to spike and potentially attract the scrutiny of the FCC and other regulators.”

Last year, T-Mobile agreed to pay $350 million and spend an additional $150 million to upgrade data security to settle litigation over a cyberattack in 2021 that compromised information belonging to an estimated 76.6 million people.

The Bellevue, Washington-based company’s shares fell 2% in after-hours trade.

Reporting by Eva Mathews and Lavanya Ahire in Bengaluru; Editing by Sriraj Kalluvila, Maju Samuel, Rashmi Aich and Savio D’Souza

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Davos 2023: Cowed crypto crowd feel winter freeze at WEF

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DAVOS, Switzerland, Jan 19 (Reuters) – In the snow and ice on the main drag in Davos, the impact of the crypto winter is plain for WEF attendees to see.

Last May, the dressed-up shop fronts that line both sides of the Promenade street running through the Swiss ski resort were dominated by crypto firms, rolling in bitcoin.

Now there are just a handful and the executives who have made it to Davos have swapped their hoodies for blazers, despite sub-zero temperatures outside.

Some of those from the digital industry which have set up shop on the fringes of the World Economic Forum (WEF) annual meeting were quick to distance themselves from cryptocurrencies.

“I hope there’s an increased focus on utility value and practical applications of the technology, and less focus on retail investors chasing meme coins,” Jeremy Allaire, CEO of USDC stablecoin issuer Circle, said.

“There was a lot of nonsense,” Allaire told the Reuters Global Markets Forum.

Former Reserve Bank of India Governor Raghuram Rajan believes last year’s plunge in digital assets allows investors to focus on the true value of the technology.

“We’re at the right place now in terms of crypto,” he said.

Executives in Davos said they are now all about blockchain technology, proper controls and regulation, and the promise of disruption that it holds for financial services and beyond.

“We are an infrastructure, plumbing play. We build infrastructure today for digital assets, which is crypto. Tomorrow it will be different assets,” said Dmitry Tokarev, chief executive of Copper, which provides custody services.

“I would question some of the stuff that I saw, ‘What is the return on that?'” Tokarev added, referring to the big presence of crypto companies at the last WEF meeting, which was unusually held in May as a result of the COVID-19 pandemic.

“We have been always ignoring the noise. All our partners were here last year. They are here this year,” Tokarev added.

The world of digital assets has changed drastically since May, with the value of the crypto market plummeting and some of the major crypto companies going under as investors pulled back from riskier assets in the face of rising interest rates.

The market capitalization of crypto currencies has shrunk by $1.4 trillion, a third of its value from peaks hit in late 2021 and some of the best-known crypto firms are under stress or have gone under, including the collapse of crypto exchange FTX.

“There is a place for trading use cases but they cannot be the singular focus, we need to move to more real use cases and put attention there,” said Denelle Dixon, CEO of Stellar Development Foundation, which supports the Stellar blockchain.

‘DODGED A BULLET’

While interest remains in the technology, the conversation is turning to responsibility.

Colm Kelleher, chairman of Swiss bank UBS (UBSG.S), told a WEF panel that blockchain technology will help reduce costs for banks. But he said the industry needed to figure out the basics, such as anti-money laundering controls.

“We kind of dodged a bullet,” Kelleher said, noting that the collapse in the value of crypto currencies had not caused systemic problems. “We did have investors who did want to invest in coinage. And we had to draw a line on what was suitable for those investors,” he added.

Yat Siu, co-founder of Hong Kong-based blockchain gaming developer Animoca Brands, was supportive of the firms in Davos.

“These are companies with serious cash positions and revenue generating companies,” Siu said. “They’re billion dollar enterprises.”

Crypto is trying to establish its presence, SkyBridge Capital founder Anthony Scaramucci said, adding “there’s nothing more establishment than the World Economic Forum.” Scaramucci maintains a bullish stance on crypto despite losses last year.

Back on the Davos Promenade, some signs of crypto’s lost swagger endure.

Parked right outside a pavilion promoting blockchain early in the week was a bright orange Mercedes.

On the hood, instead of the carmaker’s insignia was a copper-colored symbol for bitcoin.

The tires carried a slogan in white: “In Bitcoin we trust”.

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Additional reporting by Lananh Nguyen in Davos, Stefania Spezzati and Lisa Mattackal; Editing by Alexander Smith

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Wall St slips as labor market data fuels Fed worry

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  • Procter & Gamble falls after commodity cost pressure warning
  • Netflix down ahead of quarterly results
  • Dow down 0.76%, S&P 500 down 0.76%, Nasdaq down 0.96%

NEW YORK, Jan 19 (Reuters) – U.S. stock indexes closed lower on Thursday after data pointing to a tight labor market renewed concerns the Federal Reserve will continue its aggressive path of rate hikes that could lead the economy into a recession.

A report from the Labor Department showed weekly jobless claims were lower than expected, indicating the labor market remains solid despite the Fed’s efforts to stifle demand for workers.

Expectations the central bank would further dial down the size of its interest rate increases at its policy announcement next month were unchanged by the report.

Investors have been looking for signs of weakness in the labor market as a key ingredient needed for the Fed to begin to slow its policy tightening measures.

Jobless claims

Other data showed manufacturing activity in the mid-Atlantic region was subdued again in January, while data from the commerce department confirmed the recession in the housing market persisted.

“What we are seeing is the market carving out a bottom in the uncertainty so the news is having less of an effect and what we are seeing today is really just a continuation of that,” said Brad McMillan, chief investment officer for Commonwealth Financial Network, an independent broker-dealer in Waltham, Massachusetts.

“The fact we are not seeing more of a reaction says a lot of the bad news is out there.”

The Dow Jones Industrial Average (.DJI) fell 252.4 points, or 0.76%, to 33,044.56, the S&P 500 (.SPX) lost 30.01 points, or 0.76%, to 3,898.85 and the Nasdaq Composite (.IXIC) dropped 104.74 points, or 0.96%, to 10,852.27.

Traders work at the post where Carvana Co. is traded on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 7, 2022. REUTERS/Brendan McDermid

Recent comments from Fed officials continue to highlight the disconnect between the central bank’s view of its terminal rate and market expectations.

Boston Fed President Susan Collins echoed comments from other policymakers to support the case for interest rates to rise beyond 5%.

But stocks moved off their session lows after Fed vice chair Lael Brainard said the Fed is still “probing” for the level of interest rates that will be necessary to control inflation.

Markets, however, see the terminal rate at 4.89% by June and have largely priced in a 25-basis point rate hike from the U.S. central bank in February, with rate cuts in the back half of the year. .

Both the S&P 500 and the Dow fell for a third straight session, their longest streak of declines in a month.

On the earnings front, Procter & Gamble Co (PG.N) declined 2.11% after warning of commodity costs pressuring profits, despite raising its full-year sales forecast.

Analysts now expect year-over-year earnings from S&P 500 companies to decline 2.8% for the fourth quarter, according to Refinitiv data, compared with a 1.6% decline in the beginning of the year.

Netflix Inc (NFLX.O) closed 3.23% lower ahead of its results scheduled for release after the closing bell on Thursday. But the stock rebounded to gain 3.33% after posting subscriber gains for the quarter and the departure of co-founder Reed Hastings as chief executive to an executive chairman role.

Declining issues outnumbered advancing ones on the NYSE by a 1.49-to-1 ratio; on Nasdaq, a 1.70-to-1 ratio favored decliners.

The S&P 500 posted 1 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 46 new highs and 33 new lows.

Reporting by Chuck Mikolajczak, editing by Deepa Babington

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Brazil court grants bankruptcy protection for retailer Americanas

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SAO PAULO, Jan 19 (Reuters) – A Rio de Janeiro court on Thursday accepted Brazilian retailer Americanas SA’s (AMER3.SA) bankruptcy protection request, days after the company disclosed nearly $4 billion in accounting inconsistencies that have sparked a legal feud with creditors and investors.

Americanas, a 93-year-old company with stores all over Brazil and a major e-commerce unit, said in a securities filing that it would restructure debts of about 43 billion reais ($8.2 billion).

Shares in the company plunged about 42.5% to 1.00 real following news of the filing, extending its year-to-date drop to around 90%.

The firm, backed by the billionaire trio that founded 3G Capital, said the move had come “despite the efforts and measures that the management has been taking in the past few days alongside its financial and legal advisers to protect the company from the effects” of the accounting scandal.

Investors had expected the decision, with some deeming it unavoidable, especially after lender BTG Pactual (BPAC3.SA) obtained on Wednesday a court decision overturning part of the firm’s protection from creditors.

Americanas is also facing seven different investigations launched by securities regulator CVM, as well as an arbitration process requesting compensation of 500 million reais to the firm and the trio that founded 3G Capital.

In a document filed with the court, law firms Basilio Advogados and Salomao Kaiuca Abrahao attributed the urgency in filing for bankruptcy to the creditors’ decision to seize the companies’ assets.

The retailer also mentioned a debt downgrade by ratings agencies, which prevented any new loans from being extended. S&P, Moody’s and Fitch all downgraded Americanas’ credit ratings following the accounting scandal.

Earlier, Americanas had said that its current cash position stood at only 800 million reais, down from a previously reported 7.8 billion.

Lucas Pogetti, a partner at M&A advisers RGS Partners, said a large part of Americanas’ previously disclosed cash position was linked to the prepayment of receivables or deposited with creditors.

“Naturally, when the banks became aware of the company’s real situation they began to adopt a more aggressive posture to protect themselves, consequently restricting access to resources,” Pogetti said.

In the filing, Americanas asks to exclude its fintech, Ame, from the bankruptcy protection, as it is regulated by the central bank, and for authorization to increase its capital.

Americanas’ stores are ubiquitous at Brazilian shopping malls. It e-commerce unit, which traded as a separate company before a recent restructuring, is one of the country’s top online retailers.

Chief executive Sergio Rial resigned last week, less than two weeks after taking the job, citing the discovery of “accounting inconsistencies” totaling 20 billion reais.

Rial, the former head of Banco Santander’s Brazilian arm (SANB3.SA), attributed the inconsistencies to differences in accounting for the financial cost of bank loans and debt with suppliers.

Chief financial officer Andre Covre, who had just joined Americanas as well, also left the firm, which has Brazilian billionaires Jorge Paulo Lemann, Carlos Alberto Sicupira and Marcel Telles as reference shareholders.

Americanas said the reference shareholders intended to maintain the company’s liquidity at levels that allowed for a “good operation” of its stores, digital channel and other entities.

($1 = 5.2226 reais)

Reporting by Gabriel Araujo, Tatiana Bautzer and Peter Frontini in Sao Paulo and Carolina Pulice in Mexico City; Editing by Rosalba O’Brien and Bradley Perrett

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