DealBook NewsletterSoho House will begin trading. All eyes are on whether stock market investors will sign up.July 15, 2021Updated 2:37 p.m. ETImageTh
Can exclusivity scale?
The parent company of Soho House, the chain of upscale members’ clubs for celebrities and well-heeled young professionals, is to begin trading on the New York Stock Exchange today. But after pricing its I.P.O. at the low end of expectations, the question it faces is whether it can deliver on ambitious growth targets while keeping its cool, DealBook’s Michael J. de la Merced writes for The Times.
Membership Collective Group, the brand’s parent, proved it could survive the pandemic. It now has 119,000 members across 30 clubs around the world, with 59,000 people on the waitlist. The company retained 92 percent of members last year even with most of its clubs shut, and now many of its locations are back to 2019 capacity levels, Andrew Carnie, MCG’s president, told DealBook. “We’re pretty bulletproof,” he boasted.
(Nick Jones, the company’s founder and C.E.O., conceded that one thing had changed because of the pandemic. “I suppose we’re going to bed a bit earlier,” he said. “I think, in Covid, we’re a bit out of practice staying up late.”)
The company is betting that its business model has become even more attractive to public market investors. It has introduced several types of membership, including co-working, a 100-pounds-a-year ($138) membership with more limited access and, later this year, a digital app for customers in regions without clubs. Jones likened MCG to Peloton, another luxury product that he said “helped with the narrative of recurring income.”
A big test will be whether MCG can branch out from high-end hospitality. It recently bought the Line chain of boutique hotels to offer slightly more downscale accommodation around the world.
The listing will serve several goals:
MCG plans to pay down hefty financial obligations — the company had $2.1 billion in debt as of April — and renegotiate its high interest rates.
Just as importantly, the company wants to be able to tap equity markets to finance an expansion effort that includes opening more than five clubs a year. (It has openings in Paris, Tel Aviv and Rome this year, with seven more across its Soho House, Ned and Scorpios brands next year.)
Plus, Jones added, it was time to open a new chapter in its history: “We’re 26 years old. And so we’re growing up. We’re heading toward our 30s.”
Still, the company priced its I.P.O. at $14 per share yesterday, the bottom of its expected range, valuing it at $2.8 billion. We’ll see later today whether investors want to sign up to Soho House’s vision.
HERE’S WHAT’S HAPPENING
Jay Powell acknowledges the jump in inflation. The Fed chair told House lawmakers that inflation has risen “notably,” and was likely to stay high for at least six months. But he said that would later moderate, suggesting that the central bank wouldn’t shift approach.
China’s growth levels off. The country’s economy grew nearly 8 percent in the second quarter from a year ago, falling short of estimates. There’s increasing evidence that China’s post-pandemic resurgence might be unsustainable — which would have repercussions for the rest of the world.
Saudi Arabia and the U.A.E. strike a deal over oil production. The tentative compromise would end a standoff that has held up efforts by OPEC to pump more petroleum into the markets. But The Wall Street Journal notes that it may prompt other OPEC members to demand further increases; oil prices dropped 2 percent on the news.
Facebook joins the fight against Lina Khan. The tech giant demanded that the F.T.C. chair recuse herself from the agency’s lawsuit against the company, echoing a similar move by Amazon. It’s the latest effort to turn Khan’s outspoken opposition to Big Tech’s power against her, though these motions usually don’t succeed.
Netflix is getting into gaming. The streaming giant has hired a former Facebook executive, Mike Verdu, to oversee the rollout of video games on its platform by next year, Bloomberg reports. The effort will pit Netflix against deep-pocketed rivals intent on dominating the nascent market for game streaming.
Lending is a long way from a post-pandemic recovery
The nation’s biggest banks reported earnings for the second quarter this week. Although profits were up, the reports mostly got a thumbs down from investors.
Citigroup, JPMorgan Chase and Wells Fargo all reported better-than-expected earnings for the second quarter. Bank of America missed expectations yesterday, but its bottom line still more than doubled from a year ago. Nonetheless, its shares fell, as have Citi’s and JPMorgan’s since they released their latest results.
A better economy means banks set aside less to cover future losses. They can also take back money they put away to cover loans that never went bad. Because of the government’s aggressive stimulus efforts, the economic stresses of the pandemic forced relatively few borrowers into default. That’s one factor driving bank profits, even as their core business of lending remains lackluster.
Loans rose for the first time since the start of the pandemic, but only by 1 percent. Back in early 2020, the bank’s collective lending recorded a 4 percent quarterly pace of growth. Their loan balance remains $245 billion lower than just before the pandemic. If things don’t speed up, it will take another year and a half to get back to where it was.
Loans are the lifeblood of an economy, and rising lending is typically a sign of optimism in both borrowers and lenders. Coming into this year, some economists thought the combination of lockdowns lifting and stimulus flowing would cause the economy to take off like a rocket. But as the loan data shows, the recovery has so far been more like a hot-air balloon — one that has recently looked like it could use some more heat.
“I believe that cryptocurrency is an inherently right-wing, hyper-capitalistic technology built primarily to amplify the wealth of its proponents through a combination of tax avoidance, diminished regulatory oversight and artificially enforced scarcity.”
— Jackson Palmer, the inventor of Dogecoin, the cryptocurrency that started as a joke in 2013 but has been widely adopted by traders in the past year, on why he’s not tempted to get back into the crypto industry.
High-paying jobs are everywhere
For the first time on Ladders, a job search site for roles that pay at least $100,000 a year, the most listings aren’t in New York or San Francisco. There are now more remote-working jobs offered than roles in any single city in North America, the company said.
Around 15 percent of high-paying jobs are available to remote workers, up from 5 percent a year ago. Many companies are bringing workers back to the office, with hybrid setups much more common than before the pandemic. But even if employees only come in a few days a week, their work is still based where their company has operations.
The extent of remote hiring suggests that things won’t return to how they were, to the chagrin of commercial landlords in urban centers. Employees who went remote during lockdowns can be summoned back, but new hires who join expecting to work virtually are different. At the same time, with companies starting to adjust pay for remote employees in line with local norms, jobs that pay six figures in New York may soon become less lucrative if taken by a worker in New Mexico.
THE SPEED READ
Blackstone will buy a 10 percent stake in AIG’s life insurance and retirement business for $2.2 billion and manage at least 25 percent of the division’s investment portfolio. (Reuters)
The European fintech company Revolut is now valued at $33 billion after raising $800 million from investors like SoftBank and Tiger Global. (CNBC)
A short seller has accused the oat milk brand Oatly of overstating its revenue and sales margins; the company denied the allegations. (CNBC)
The indie film studio A24 reportedly considered selling itself for as much as $3 billion as media giants race to buy up content. (Variety)
Senator Chuck Schumer, the majority leader, has proposed decriminalizing marijuana at the federal level. (NYT)
Ireland reportedly plans to raise its corporate tax rate to avoid becoming a “pariah.” (Irish Examiner)
India’s central bank accused Mastercard of breaking data storage rules and ordered it to stop taking new debit and credit card customers. (Reuters)
Twitter’s disappearing tweets feature is, well, disappearing. (NYT)
Facebook is unveiling a $1 billion program to recruit content creators and influencers. (NYT)
How a former plastic surgeon became one of the most influential players in the crypto industry. (FT)
Not only is there a shortage of computer chips, there’s an increasing supply of fake ones. (WSJ)
Best of the rest
Britney Spears can hire her own lawyer to push for an end to her conservatorship, a judge ruled. (NYT)
Jeff Bezos will give $200 million to the National Air and Space Museum, the biggest donation to the Smithsonian. (NYT)
Coca-Cola is changing the taste of Coke Zero. It swears this won’t be New New Coke. (NYT)
Need data to pitch your boss on remote working? Goldman Sachs can help. (Insider)
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