Soho House has less money, mo problems | Blackstone makes itself at home |

Hi Finimizer, here's what you need to know for June 23rd in 3:06 minutes.

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Today's big stories

  1. The company behind Soho House has filed for an initial public offering despite a track record of losses
  2. It’s almost earnings season again, and there’s a good way to tell which inflation-proof companies will come out swinging – Read Now
  3. Private equity giant Blackstone announced it’d be buying a real estate firm for $6 billion

That’s Rich

That’s Rich

What’s Going On Here?

Membership Collective Group (MCG) filed for a US initial public offering (IPO) this week, but the owner of Soho House members clubs looks like it has champagne tastes on a beer budget.

What Does This Mean?

MCG has been busy: the company owns a home decor retailer, nine workspaces in London, LA, and New York, and 28 Soho House members clubs around the world. The latter boast 119,000 members who each shell out a regular membership fee, as well as pay for food, drink, and other services at their venue of choice.

But not enough, apparently: the company saw its revenue slip from $642 million in 2019 to $384 million last year. Add to that a $235 million loss in 2020 and a $91 million loss in the first quarter of this year, and suddenly it’s not looking so fancy anymore. MCG, then, will be hoping investors give it a pass what with this anything-but-average last 18 months, and instead buy into its potential for future growth.

Why Should I Care?

For markets: That’s a lot of debt.
Investors buying into the IPO are essentially betting that Soho House will benefit now that fatcats are donning their going-out monocles again. They might also point to flexible working, which could give revenue at Soho House’s workspaces a boost. But the risks are serious: the company has $826 million in debt, which it plans to pay off using most of the money it raises from the IPO. That’ll leave very little left to invest in actually growing the business…

Zooming out: This time it’s different. 
Anything the US can do, Iceland can do better: shares of bank Islandsbanki started trading on Tuesday in the country’s biggest-ever IPO. It feels like just yesterday when Iceland’s biggest banks were being wiped out by the financial crisis, so here’s hoping things work out better this time around. And seeing as Islandsbanki’s shares initially jumped 20%, it’s off to a good start.

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2. Analyst Take

How To Spot This Earnings Season’s Inflation-Proof Winners

What’s Going On Here?

Earnings season is on the way, and you can bet plenty of companies will have felt the effects of the rising prices of energy, metals, and agriculture.

Those price rises have, after all, been pushing up the costs of everything from production to transport.

And sure, most investors already know which companies are relatively safe. Utilities, for example, are in a position to pass the higher costs straight on to customers.

But there are other, less obvious companies and sectors that are relatively impervious to commodity-driven inflation – those with one particular feature in common.

That’s today’s Insight: how to tell which companies will benefit from commodity price inflation, along with a list of those that are in the best and worst positions.

Read or listen to the Insight here


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Second Home

Second Home

What’s Going On Here?

Blackstone – one of the world’s biggest real estate investors – announced on Tuesday that it was spending $6 billion on the keys to residential landlord Home Partners of America (HPA).

What Does This Mean?

HPA owns more than 17,000 single-family homes across the US, buying would-be tenants’ properties of choice and offering them the chance to eventually become owners themselves. And homes are a hot market right now: sales activity hit its highest level since 2006 last year, with remote working and rock-bottom interest rates sending demand for bigger living spaces through the roof. Median prices, meanwhile, have increased by 28% since 2019. That’s attracted the attention of big investors, which snapped up 15% of US homes for sale in the first quarter of 2021. Blackstone – which bought HPA from two rival private equity firms – will be hoping that trend continues, turning the firm a tidy profit when it sells HPA to either other private or public investors.

Why Should I Care?

The bigger picture: Bad call or good call?
Private equity investors – which have over $1.5 trillion burning a hole in their pockets – have a reputation for sniffing out opportunities. And if the current US housing shortage takes a decade to fix like some analysts are predicting, the firm could ride the residential real estate wave for a while yet. But the global housing market is showing the telltale signs of a bubble, and Blackstone’s big move could just as likely be a rash call (tweet this).

For you personally: This could affect the whole real estate market.
Private equity firms have a reputation for bumping up prices to generate as much cash as quickly as possible. And while HPA’s portfolio represents just 0.25% of single-family homes in the US, higher rents and home prices from Blackstone could encourage other residential real estate owners to follow suit – making it harder for tenants and buyers alike across America.

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💬 Quote of the day

“I see my body as an instrument, rather than an ornament.”

– Alanis Morissette (a Canadian-American singer, songwriter, musician, and actress)
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