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. |