Why Businesses Are Selling Their Tariff Refund Claims to Wall Street

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Four people on a US registered speedboat are shot and killed after being intercepted in Cuban waters. Plus, while businesses wait to see if they get tariff refunds, Wall Street is buying up those claims now.

Caitlin McCabe (0:30)

Companies that paid millions and millions of dollars in tariffs are facing this crucial decision right now. Do they want to potentially wait years for this refund process to play out? Or do they want to strike a deal with an investment firm that's willing to give them a fraction of their money today?

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And prediction market platform Kalshi has fined two users for breaking its rules. It's Wednesday, February 25th. I'm Alex Ossola for the Wall Street Journal. This is the PM Edition of What's News, the top headlines and business stories that moved the world today.

This just in, four people were shot and killed, and six others were injured this morning on a US-registered speedboat after being intercepted in Cuban waters. That's according to Cuba's Interior Ministry, which also said that the vessel, which was registered in Florida, opened fire on the island's border patrol when they approached the boat on Cuba's north-central coast. As of this afternoon, the identities or nationalities of the individuals on the boat weren't disclosed. The US State Department didn't immediately return a request for comment, while Cuba's Interior Ministry said that authorities are investigating the incident. The deadly clash comes as the Trump administration has sought to choke off fuel shipments to Cuba in recent weeks. In fact, today, the Trump administration announced that it is loosening some restrictions on fuel shipments to the country amid a growing humanitarian crisis. The US Treasury today said that it would allow the resale of Venezuelan oil to private companies in Cuba, though sales to the government in Havana are still illegal. It also said that some shipments of American fuel would be allowed for a handful of US companies. As we reported earlier this week, the chaos over President Trump's tariffs is sending business leaders scrambling to sort out what may come next. But some on Wall Street are seeing an opportunity. Investment firms are buying companies' rights to any refunds they might be due. I'm joined now by WSJ Markets reporter, Caitlin McCabe. Caitlin, let's start with the basics here. Why would a company sell its right to tariff refunds?

Caitlin McCabe (2:36)

So what we're seeing is sort of the latest iteration of this kind of fun and esoteric corner of finance, where essentially investment firms will buy the rights to money that another party is owed. Companies that paid millions and millions of dollars in tariffs are facing this crucial decision right now. Do they want to potentially wait years for this refund process to play out after the Supreme Court decision that we got last week? Or do they want to strike a deal with an investment firm that's willing to give them a fraction of their money today?

Alex Ossola (3:12)

Okay, that makes sense from a company perspective, but how do investment firms stand to make money here?

Caitlin McCabe (3:17)

So basically what they're doing is they're paying pennies on the dollar today in hopes that they will make a full dollar, if not more, down the line. And I think that's the big question right now is how will this process play out? In its ruling, the Supreme Court didn't weigh in on whether the government would have to pay refunds on the tariffs, but essentially they're betting we think that this is going to happen, we think that companies will get refunds, and so we'll just pay a fraction of that today in hopes of a bigger payout down the line. And so even months ago we saw investment firms buying up these claims. They were trading in the teens, got as high as around 20 to 22 cents based on what I was hearing. And then when the Supreme Court decision came out last Friday, that nearly doubled from what I'm hearing in the market. Now these claims are trading around 40, 40-ish cents on the dollar.

Alex Ossola (4:09)

And effectively that means that investment firms have to pay a whole lot more because there's a little bit more certainty here.

Caitlin McCabe (4:15)

That's what they're wagering. Again, none of this is guaranteed, but they're thinking, you know, if this market continues to go in this direction, better to lock in 40 cents rather than 50 or 60 or even higher. There's also a chance some companies are speculating that they might be paid interest on the tariffs that they paid. So there is a world where potentially investment firms could make that dollar back plus any interest on top of it.