Month: July 2021

House Speaker Nancy Pelosi (D-CA) disclosed from her ivory tower late last week that her investor husband, Paul Pelosi, made several now-profitable trades in various securities.

For starters, Pelosi bought both Amazon on May 21 when it closed at $3,259.05. Fast forward six weeks and great news for Amazon after the Pentagon pulled the rug out from Microsoft’s $10 billion JEDI cloud computing deal (opening the door for Bezos), and the trade is looking great.

Then there’s Pelosi’s 40% Nvidia score after a June 3rd, pre-split purchase. 

The worst thing about these transactions is that they were done in MAY and JUNE, but disclosed in July!

Incredible when elected officials are using highly leveraged options on maybe private information

Paging @ryangrim @krystalball @esaagar @TheYoungTurks @FoxBusiness @cvpayne

— unusual_whales (@unusual_whales) July 6, 2021

That’s not all! 

Paul Pelosi on May 21 spent up to $250,000 on 50 Apple calls that have a strike price of $100 and that expire on June 17, 2022. He also bought 20 Amazon calls, costing up to $1 million, that have a strike price of $3,000 and that also expire on June 17, 2022. 

On June 18, Paul Pelosi, exercised his Alphabet call options giving him the right to buy 4,000 shares at a price of $1,200 apiece, or $4.8 million. The Alphabet call options were originally purchased on Feb. 27, 2020. 

The transactions were disclosed in a filing on Friday, July 2. –Fox Business

According to Fox Business, “The speaker has no involvement or prior knowledge of these transactions,” adding “The speaker does not own any stock.”

Pelosi purchases multi-million dollars worth of FAANG and $NVDA call options in a report out minutes ago pic.twitter.com/cKS0owvFZU

— congresstrading.com (@congresstrading) July 6, 2021

The Pelosis have at least one ardent defender in former Rep. Jill Long Thompson (D-IN), who insists that even though Paul is married to the House Speaker, it’s unlikely that he would “have any information that someone else wouldn’t,” adding “Members of Congress make it clear what their positions are on these issues and the fact that they’re working on a piece of legislation that would be public information.”

On June 11, the House Judiciary Committee advanced several bills with bipartisan support which would limit the powers of FAANG companies. The bills, which passed through committee by slim margins, have yet to be voted on by the House.

This is not the first time that investments made by Paul Pelosi have been made in close proximity to happenings in Congress. 

Paul Pelosi in March exercised $1.95 million worth of Microsoft call options less than two weeks before the tech stalwart secured a $22 billion contract to supply U.S. Army combat troops with augmented reality headsets. 

In January, he purchased up to $1 million of Tesla calls before the Biden administration delivered its plans to provide incentives to promote the shift away from traditional automobiles and toward electric vehicles. –Fox Business

The SEC is a joke.#Tesla #GameStop #StockMarket pic.twitter.com/qrIUjZ3h5j

— Roger Ver (@rogerkver) February 2, 2021

Meanwhile, Congressional Democrats are going after Redditors who’ve banded together to squeeze meme stocks.

Authored by Mike Shedlock via MishTalk.com,

The best case ever against critical race theory is in the following video, sure to go viral.

Amazing parent testimony on Critical Race Theory in our schools. pic.twitter.com/Llbe0yBn4U

— James Lindsay, uncitable (@ConceptualJames) July 5, 2021

Partial Transcript – Emphasis Mine

I’ve got two children her in the school district. It’s very apparent here by all the parents who have spoken, that this board and the school district is failing. More importantly, about Critical Race Theory, this theory was never meant to be brought into grade schools, high schools at all. 

It’s actually taught in the collegiate atmosphere, more importantly, the legal portion of the collegiate atmosphere to see different laws through the lens of race from an ethics and ethical standpoint, not for grade schools and high schools.

The problem in bringing it up at the high school and grade school level is we do not have the educators to properly teach the kids. 

Instead, educators use it as their own agenda, to indoctrinate the kids to hate each other. And whether you believe that or not, the reality is that is what’s happening. 

Critical Race Theory is teaching us that white people are bad. That’s not true. That would teach my daughter that her mother is evil.

You have an educator within your staff that has pulled my daughter aside and said ‘You’re a minority. So you know better than to engage in certain things.’ [Audience gasps, wow, whoa, etc.]

When I brought this to the school’s attention, nothing happened to that educator. Instead, my daughter was brought in, and she was ridiculed. [Again audience gasps].

 So my question is now, with Critical Race Theory being brought in, what is your criteria to educate the educators? And who are you to educate my children, or any of our children on life issues? That’s our job.

Your job is to teach them math and science. Our job is to teach them about life. 

I believe racial issues and tensions across the US are nowhere near what they used to be decades ago. Do we have a long way to go? Sure. Do we have individuals who need to be taught? Absolutely. 

But people here do not look at me as a black man. They look at me as a man coming in front of you, addressing an issue that we all are passionate about. [applause!] 

End Transcript

That video is not an isolated event. You can find dozens of articles.

Furious Mother Slams School Board 

Mother Demolishes School Board Forcing Critical Race Theory

To Promote Equality, California Proposes a Ban on Advanced Math Classes

Please note To Promote Equality, California Proposes a Ban on Advanced Math Classes

Adversity scores are the Latest in Dumbing Down of US Education.

Bill Maher on Critical Race Theory

Even the Left has serious issues. 

In a must see video, comedian Bill Maher blast wokes who have no sense of massive progress on many liberal and Libertarian fronts.

To play the video and for a partial transcript as well, please see The Woke Liberals Have a Bad Case of Progressophobia

Backlash Coming

This should have a major impact in the midterm elections, and I believe it will if Republican can put aside infighting.

CRT is not (or at least should not) be a Left vs Right issue. Instead, it is a right vs wrong issue. 

School boards, typically liberal progressives, are on the very wrong side of this debate.

“Your job is to teach them math and science. Our job is to teach them about life!”

Indeed. And a huge majority of the public would agree. Unfortunately, grade school kids are caught in the crossfire of Woke indoctrination and a Woke debate and that belongs in a collegiate law class.

*  *  *

Like these reports? I hope so, and if you do, please Subscribe to MishTalk Email Alerts.

Two months ago, a forward-looking Wall Street responded to the Bank of America Fund Manager Survey for the month of May, and concluded that the peak of the post-covid expansion was now behind us, whether looking at growth expectations…

… profit margins expectations (46% to 26%)…

… capex spending plans (54% to 51%)…

… and inflation (93% to 83%).

Of course, these “forward-looking” expectations needed some hard data validation which they got today when the latest data confirmed that the Global Manufacturing PMI has now peaked.

As DB’s Frances Yared writes, the Global Manufacturing PMI was running ahead of leading indicators (key exporters such as Taiwan, Chile and South Korea). Well, the latter indicators had been consistent with the Global PMI Manufacturing at 54 rather than the 56 observed at the peak last month. But the reversal is finally here, and the latest Global PMI print declined by 0.5pt in July and, based on the aforementioned leading indicators, should decline another 1.5 points.

The good news: as Yared notes, a PMI at 54 would still be very high from a historical perspective and leading indicators are so far stable. “Thus, the decline from the peak should be seen as a correction from an overshoot rather than a trend at this stage.”

The bad news: today’s peak PMI data definitively confirms that we are now “mid-cycle” as Morgan Stanley’s Michael Wilson has been warning for months.

For those wondering what that means for market, we republish some of our observations from our May 12 article looking at just this question:

Just days after Morgan Stanley said that it “rather than getting excited about the reopening, we are getting more concerned” pointing to the infamously volatile mid-cycle transition, when the the peak rate of change reverses and execution risk jumps as visualized by the following chart showing headline Manufacturing Purchasing Managers Index and Prices Paid component…

… BofA has jumped on board the mid-cycle bandwagon, and in a note from the bank’s chief quant, Savita Subramanian, she writes that the bank’s regime Indicator rose to highs seen only once before in the last 30+ years: in Feb. 2004, after which Mid-Cycle continued for four more months.

Does this mean that the end-cycle – which is quickly followed by recession – is imminent?

According to the BofA quant, “historically Mid-Cycle has lasted for 12 months, but today we are just four months in. Thus, the current phase could extend at least through summer and potentially beyond.”

What does this mean for investing? Mid-Cycle is usually accompanied by rising interest rates and capex: thus valuation metrics which account for the firm value to incorporate more expensive debt, and profitability that reflects capex are important. P/E and Price to Book are less effective, but EV/EBITDA has outperformed the index 75% of the time in this phase (and today EV/EBITDA positioning is close to a record underweight.) Additionally, “quality value” tends to outperform “deep value” in this phase. And if we have reached peak stimulus, quality should outperform from here to the detriment of other factors.

Picking up on this, Leuthold Group’s Jim Paulsen, who has analyzed bull cycles of the past 40 years, notes that while every bull market is different, “the pattern they follow is usually the same: a strong run at the start of the cycle, a period of hesitancy that lasts a year or more, then the resumption of the advance”, or a crash, of course, assuming no Fed bailouts. While we don’t know what the endgame is, we agree with Bloomberg that are now “at the pause stage of the current cycle right now.”

In any case, describing the Mid-Cycle, or as he calls it the Revaluation phase, Paulson notes that’s when corporate performance continues to improve but valuations get stretched and the pressure of rising yields intensifies. That’s when stocks go nowhere for a year at best or decline by low-double digits at worst. And sure enough, as Bloomberg notes, the checklist of signals that led to prior swoon periods is here: rising valuations that have almost doubled from a trough, improving corporate performance and yields.

Some examples:

• In 1982, the stock market posted a sharp rally as profits and bond yields continued to decline. A 15% correction into mid-1984 followed, leaving the S&P 500 essentially flat for that year. The next year, earnings started to recover and bond yields went up.
• In 1992, earnings and yields declined heading into the 1994 mid-cycle, when the S&P fell by nearly 10% in early 1994 and stayed flat until 1995.
• A similar pattern occurred in 2004, when the S&P 500’s multiple declined from 22 times earnings in late 2003, to less than 17 times by late 2004.
• After an initial recovery in the spring of 2009, the S&P 500 stumbled as stocks underwent a 15% correction in the second quarter of 2010.

Finally, how did economically-sensitive sectors fare during the revaluation period? As Bloomberg notes, small-cap stocks gained in three out of four pause stages, adding on average 5.6%, after falling more than 7% during a pause period between the spring of 1983 and summer of 1984. Cyclicals gained in two out of four instances — in 2004 and 2010, when they posted a modest advance that exceeded the broader peers.

Authored by Jonathan Turley,

Asatar Bair, an assistant professor of economics at Riverside City College, is under fire this week for his praise of one of the most blood-soaked, tyrannical figures in history: Joseph Stalin.  Bair is a self-described Marxist but most communists draw a line well clear of Stalin who was responsible for killing millions. As will come as little surprise to many on this blog, I strongly support Bair’s right to espouse his Stalinist views even though I find them utterly absurd and offensive.

In tweets, Bair expressed his support for Stalin as “a very successful revolutionary, a great contributor to Marxist theory” and “one of the great leaders of the 20th [Century].”  He added Stalin was also a “great listener and collaborator during discussions.”

and then there are his successes as a leader. First, the foresight to fear a belligerent German fascism, then the tactical ability to successfully defeat the world’s greatest invading army, combined with the strength to make tough decisions that have no easy answers

— Dr. Asatar Bair (@asatarbair) June 27, 2021

He may also have been a great dancer . . . in between sending millions to their deaths, murdering opponents, and destroying any semblance of freedom. Yet, Bair also heaped praise in tweets for the Chinese Communist Party.

His Stalinist support is due to what he sees as tremendous improvements of health care for citizens.

outcomes across the board, due to massive investments in public health at all levels. Soviet socialism brought universal literacy to a county in which only a small fraction had been literate, and invested huge sums in colleges and universities in which students were paid to study

— Dr. Asatar Bair (@asatarbair) June 28, 2021

Yet, Bair ignores the millions who were killed. The Stalin health care plan was a bit more lethal for them. Certainly Leon Trotsky found Stalin’s ice-axe remedies less than optimal. He also ignores that there were improvements throughout the industrial world after World War II and that such changes could have occurred without Stalin. Indeed, Stalin is blamed for a series of moronic plans that devastated the Soviet agriculture and economy due to his one-man rule.

Putting aside the millions who were killed or sent to Siberia, consider just the Soviet famine of 1932-33 which killed many millions, including an estimate of 7.5 million in the Ukrainian population alone. Stalin ordered the eradication of the wealthy peasant or “Kulak” class. It wiped out agricultural production. The life expectancies of the millions who died was hardly a victory for the working class or a model of public health policy.  He has been accused of mass murder and genocide.

Stalin was also responsible for leaving his country vulnerable to the German invasion after he conspired with Hitler as an ally against other countries. Stalin’s purges included wiping out the officer corp, leaving the Soviet Army without sufficient leadership and experience. When Hitler betrayed him, the Soviet Army effectively collapsed in disarray. Tens of millions were killed by the end of the war.

Stalin relished murder on a grand scale. He famously stated “The death of one man is a tragedy. The death of millions is a statistic.” His health care plan was summed up in his declaration that “death is the solution to all problems. No man – no problem.”

Nevertheless, Riverside college district’s Chancellor Wolde-Ab Isaac told Fox News that while Bair’s “statements and ideas may be unpopular or even controversial, his right to express himself is constitutionally protected.” That is absolutely correct.

My only concern, again, is the consistency of universities in protecting controversial speakers on the left as opposed to those on the right. I have defended faculty who have made similarly disturbing comments denouncing police, calling for Republicans to suffer,  strangling police officers, celebrating the death of conservatives, calling for the killing of Trump supporters, supporting the murder of conservative protesters and other outrageous statements. These comments were not protested as creating an “unsafe environment” and were largely ignored by universities. However, professors and students are routinely investigated, suspended, and sanctioned for countervailing views.

As we have previously discussed (with an Oregon professor and a Rutgers professor), there remains an uncertain line in what language is protected for teachers in their private lives. The efforts to fire professors who voice dissenting views on various issues including an effort to oust a leading economist from the University of Chicago as well as a leading linguistics professor at Harvard and a literature professor at Penn. Sites like Lawyers, Guns, and Money feature writers like Colorado Law Professor Paul Campus who call for the firing of those with opposing views (including myself).  Such campaigns have targeted teachers and students who contest the evidence of systemic racism in the use of lethal force by police or offer other opposing views in current debates over the pandemic, reparations, electoral fraud, or other issues.

A conservative North Carolina professor  faced calls for termination over controversial tweets and was pushed to retire. Dr. Mike Adams, a professor of sociology and criminology, had long been a lightning rod of controversy. In 2014, we discussed his prevailing in a lawsuit that alleged discrimination due to his conservative views.  He was then targeted again after an inflammatory tweet calling North Carolina a “slave state.”  That led to his being pressured to resign with a settlement. He then committed suicide. We are approaching the one year anniversary of his death.

Riverside College should be praised for its support of free speech for Bair. He is part of a diversity of opinion that should be cherished on college campuses. While Stalin was a tyrant to killed those with opposing views, we value such freedoms.

The question is whether such tolerance would be shown those on the other end of the political spectrum.

One upon a time, when central bank “independence” first materialized – even though as we have noted in the past central banks are anything but independent (see “Who Owns The World’s Central Banks“)…

… their mandate was to control inflation and generally this was their absolute priority.

However, as DB’s Jim Reid writes today, recent years have seen central banks increasingly enter the debate on numerous other topics including fiscal policy, social justice, race, gender issues, climate change and inequality.

Enter Reid’s “chart of the day”, which shows a snapshot of this in terms of mentions of inequality over time in speeches from developed market central bank officials.

As Reid says, while “these are all admirable and crucial topics to discuss and could help make the world a better place” it does however show “how central bank power and influence has changed and also how they seem to be giving governments cover to spend on these issues.”

He also adds that this is one of the reasons an increasingly vocal minority of the DB Research staff thinks inflation is more likely going forward (see DB’s thoughts on why Inflation Is About To Explode “Leaving Global Economies Sitting On A Time Bomb“). As Reid concludes, governments want to spend more to deal with the issues above and central banks seem increasingly comfortable to support them in that aim. As a result, co-ordinated monetary and fiscal policy is more likely going forward. It’s also time to ask just who elected these “independent” central bankers, and demand independence from their ideological bias.

Didi’s staggering selloff just days after its IPO (in which it skyrocketed higher initially, sucking in a crowd of retail traders, only to plunge on news that Beijing was bringing it’s antitrust smackdown to Didi’s doorstep) was the talk of Wall Street on Tuesday, beginning with last night’s selloff in SoftBank and continuing through the close, where Didi finished up only slightly above its session low.

Even as stunned institutional backers dispatch analysts to parrot the bullish line – that Didi is already taking steps to address the crackdown and that it remains a dominant player in the international ride share market – reports that Beijing is sending a message to domestic firms that listing in NY is now off limits have triggered speculation that Didi might be the last major US IPO of a Chinese tech giant for a very long time.

To support this, CNBC reported Tuesday afternoon that ByteDance, owner of popular social media platform TikTok, is now reconsidering plans to list in the US – and is looking at Hong Kong instead.

DEIRDRE BOSA: Hey Kelly. Well for Didi, those risks should have been well known, 15 pages in the IPO prospectus relating specifically to doing business in China. Before Didi, there was a crackdown on Ant Group, Alibaba and other tech giants, including Didi itself. Now Xi Jinping is sending a message that control and data protection, national security, more important than having global champions for tech companies. Now that theme has already been hitting the performance of other Chinese companies listed in the US, you just saw that from Dom, but the fallout could be even broader, the story isn’t done. Shares of SoftBank, Didi’s largest shareholder, they were off 5% Monday in Tokyo, they recovered a little bit yesterday. Uber holds the second largest stake, it’s down today that, though, there could be a tradeoff here since it competes with Didi in markets like LATAM as well. Meanwhile though, several sources are telling me that the crackdown could also affect TikTok parent, ByteDance, one of the most anticipated IPOs this year and the first Chinese company to really succeed in the West. I’m told that its listing could be delayed until 2022 and its valuation in the private market may take a haircut, an evaluation that I’m hearing was as high as $450 billion. Back to Didi though, there is now a key question that investors are asking and that is, did the Chinese authorities ask the company to delay its IPO and if so, as the Journal reported today, why weren’t investors notified, early investors as well as ones that bought in through the IPO. Kelly, lots of questions surrounding and we’re trying to get to the bottom of it.

According to CNBC, ByteDance has accepted the fact that its change of venue will likely result on a lower valuation…but defying the CCP would almost certainly lead to BD being made an example of. And Beijing has repeatedly exhibited its skill at sabotaging IPOs.

EVANS: So Deirdre, did you just say that TikTok, ByteDance’s valuation was as high as $450 billion, half a trillion dollars for a private company, you know, a pre IPO company has to be almost unheard of, I guess that’s just a side note. But on this issue itself, what do you think we watch for, for the next shoes to drop?

BOSA: That’s a good question. I think you see how Didi handles this and we did get a statement from them sort of saying thank you to the Chinese regulators because they’re going to emerge stronger from this but I think you also watch what the Chinese authorities do now, does the crackdown continue. We saw three more companies publicly listed newly IPO Chinese companies on US exchanges targeted over the weekend so is there going to be more? What happens with the big, big giants like Tencent and Alibaba and Meituan, there was this thinking that when Tencent received that huge fine in the billions of dollars that maybe it could move forward. Does that still apply or does the crackdown continue so those are all things to watch for as well as commentary from the CCP. We heard Xi Jinping’s comments last week, which, you know, some might say could have been writing on the wall. They said that they wanted to protect their own, you know, sovereignty and their own companies and it was very nationalistic so we’ll continue to monitor what comes out of the party.

Beijing has already made clear to dozens of firms that American IPOs are no longer acceptable. Instead, they can list domestically, or in Hong Kong. After all, with Beijing’s natsec crackdown making Hong Kong an increasingly inhospitable place for foreigners, if domestic firms don’t list in Hong Kong, who will?

Weston Nakamura returns to the Daily Briefing to discuss his updated outlook on oil prices as OPEC+ struggles to strike a deal. Nakamura, joined by Real Vision’s Ash Bennington, shares his thoughts on other commodities and market sentiment as elevated prices could serve as evidence for temporary supply bottlenecks or persistent inflation. The pair looks at China’s increased regulation and its impact on Chinese companies traded in U.S. markets.

In what its underwriters will likely market as the pure-play bet on the post-COVID urban recovery, Soho House, the social club popular with urbane wannabe influencers and social climbers, revealed Tuesday morning that it’s planning on raising as much as $480MM in an IPO that will target a valuation of $3 billion, pricing the shares at between $14 and $16.

Evoking a less-than-flattering comparison to the botched WeWork IPO, the company revealed in its S-1 that its Class B shares (which will be restricted to investors and company insiders) would have 10 votes per share, while its Class A shares, which will be offered to the public, will only carry one vote. A similar arrangement helped sink WeWork’s planned IPO as investors balked at handing over so much power to then-CEO Adam Neumann and his family. The company plans to set aside 3.5% of the Class A shares being offered and reserving them for employees and members, allowing them to get in at the offering price.

One of the most amusing sections of the prospectus is the part where management details all the different membership packages it offers.  Management also repeatedly mentions the company’s “growing” wait list, including in a letter from CEO-founder Nick Jones. At the same time, the firm’s revenues have cratered since the start of the pandemic, with Soho House’s parent company booking just $72MM in revenue during Q1 2021, amounting to a net loss of $72MM.

But the company’s losses didn’t start with the pandemic. One year earlier, during Q12020 (which included the start of the COVID pandemic) the firm’s financial situation wasn’t that much better: For Q12020, the firm had total revenues of $142MM, a net loss of $45MM and Adjusted EBITDA of ($9MM).

Source: Bloomberg

Beginning with one location in London, the company has since opened eight additional ‘houses’ in London, New York and LA over the last two years and as of April 4, 2021, it had more than 1K members. Costs can vary, but even the cheapest membership plans will cost a few hundred dollars a month. For Soho House members, a US Soho Works membership ranges from $250 to $600 per month, depending on membership type.

Despite reporting consistent losses and with the shift away from urban living presenting a long-term tailwind for the firm (though the IPO will be fortuitously timed to coincide with the UK’s post-COVID reopening), Soho is seeking a lofty $3 billion valuation that would be more appropriate for a tech firm. If that sounds familiar, it may be because it’s essentially the same playbook used by WeWork.

Here’s a breakdown of the different membership types and businesses outlined above (text taken from the prospectus):

CITIES WITHOUT HOUSES

In 2017, we introduced a new type of Soho House membership known as Cities Without Houses (‘CWH’), which opens up the Soho House membership to people who live in cities where we do not yet have a physical House. This membership allows us to welcome members to our global community in new geographies, generates additional revenues on our existing base of Houses and provides intelligence for future growth, which we have employed to open new Houses in certain locations, including in Austin, Texas and Paris, both of which are expected to open in 2021. We currently have more than 5,000 CWH members across 45 cities, paying an annual US membership price of $2,630.

SOHO HOUSE DIGITAL MEMBERSHIP

The ambition for Soho House has always been to create a truly global membership that brings creative people together, from all over the world. We believe that we will be able to achieve this through the introduction of Soho House Digital Membership—a new, paid digital-only membership that we plan to launch in late 2021. Not limited by our physical footprint, Soho House Digital Membership will expand our global reach, allowing us to move further into Asia, Africa and South America, adding fascinating creatives from dynamic cities to our membership.

Soho House Digital Membership will be subject to the same application and approval process as Soho House membership, allowing like-minded individuals to connect, communicate and collaborate with each other, in a purely digital space through the SH.APP. It will make our membership truly diverse, and will enable the best creatives from all over the world to make meaningful connections with each other. In the same way that we’ve grown Cities Without Houses membership in 45 cities around the world, we will use our connections and liaisons on the ground in new cities to build awareness of digital membership, growing it organically through existing creative communities.

By leveraging our digital platforms in this way, and removing the reliance on physical spaces to experience the benefits of our membership, we have created a gateway to previously untapped growth opportunities. We believe this new membership type will be attractive to potential members who are already used to socializing, networking and working digitally. Existing Soho House members will also receive the full functionalities of the Soho House Digital Membership, and therefore, the introduction of the Soho House Digital Membership only serves to improve the richness of their membership experience, making it more valuable – with new opportunities to connect with and consume content from a truly global and diverse membership base.

SOHO FRIENDS

There are a significant number of people who enjoy the Soho House way of living and who have already visited our Houses as guests, stayed in our bedrooms, or visited our public restaurants and spas, but do not currently have a Soho House membership. To respond to this audience, we launched Soho Friends in November 2020 for an annual subscription cost of £100. We offer access to physical spaces, including Soho House bedrooms, and Soho Studios (our new social spaces for Soho Friends and Soho House members) that host curated programs of events and screenings, with additional benefits from our restaurants, spas and online retail brands, although Soho Friends do not have full access to our Houses. Between November 2020 and April 2021, we have received almost 6,000 applications, the majority of which originated from a recommendation of a Soho House member or a MCG employee, and accepted over 4,000 Soho Friends members. We intend to grow this membership brand in a measured way so that our Soho House members continue to account for the majority of visitors to our Houses and restaurants.

SOHO HOME

Soho Home was created as a result of the constant requests from our members to recreate the look and feel of the Houses in their own homes. Soho Home is an interiors and lifestyle retail brand that offers handcrafted furniture, lighting, textiles, tableware and accessories through e-commerce. Over the past year, we have transformed Soho Home into a high growth retail business, and in October 2020, we launched SOHO HOME+, which is a subscription-based membership platform with over 2,600 members as of April 4, 2021, that offers price discounts, free delivery, and expert design advice plus early access to new collections and seasonal sales for an annual price of £60.

SOHO WORKS

First launched in 2015, Soho Works provides its members with the space and resources to work alongside other like-minded individuals and businesses — facilitating connections and providing the tools to flourish. Aimed at existing Soho House and Soho Friends members, Soho Works draws on the same design principles and membership ethos as Soho House, but is a space purposed entirely for work and creative collaboration.

Beginning with one location in London, we have since opened eight additional sites in London, New York and Los Angeles over the last two years and as of April 4, 2021, we had over 1,000 members. Soho Works membership rates vary by location and Soho House membership status. For Soho House members, a US Soho Works membership ranges from $250—$600 per month, depending on membership type.

SCORPIOS BEACH CLUB

Set in a cove on the southern tip of Mykonos, Scorpios offers a one of a kind beach experience with a well- established globally recognized brand. With a restaurant, terraces and daybeds, and a distinctive wellness offering, Scorpios enriches the lives of its guests who are looking to escape from their daily lives. We believe the Scorpios concept has significant potential to expand into additional locations as a key part of our platform and we expect to open our second site in Tulum, Mexico at the end of 2022. While we do not currently offer a standalone membership, there is significant interest from our customers to do so and we therefore plan to launch a unique Scorpios membership in 2022.

THE NED

The Ned has created a new space in the heart of the City of London for its members to meet, eat, drink and socialize. The Ned brand seeks to embody a “city within a city” full-service destination, by playing host to multiple restaurants, bedrooms, a range of grooming services, spa, gym and a full service members’ club. The membership offered by The Ned (‘Ned’s Club’) is aimed at a broader group of professional people. As of April 4, 2021, Ned’s Club had over 3,000 members paying an annual subscription price of £3,150, and intends to expand into additional cities beyond London, as well as launch Ned Friends – a more accessible membership similar to Soho Friends, for frequent visitors and customers of The Ned. We receive management fees under our hotel management contract for the operation of The Ned.

As Bloomberg’s Chris Bryant points out, even Soho House’s bankers are approaching the firm and its finances with trepidation. Just look at this loan from Goldman.

A March refinancing replaced a big debt facility provided by Permira Credit with another one funded by Goldman Sachs Group Inc. (Goldman is among a slate of top-tier banks underwriting the offering.)

The $440 million Goldman facility pays 2% cash interest with another 6% on top that’s paid in kind, according to the prospectus, meaning the debt gets bigger over time. Those fairly onerous terms say something about Soho House’s riskiness

Bryant also objected to the voting rights issue that we noted above.

Asking for money from new shareholders without granting equal voting rights takes particular gumption. The co-owners — billionaire Ron Burkle’s Yucaipa Companies LLC, entrepreneur Richard Caring and founder and Chief Executive Officer Nick Jones — plan to receive Class B stock that grants them ten votes per share, according to a prospectus published on Monday. This will allow them to continue to exercise majority voting power after the New York listing, meaning they retain a veto over key decisions and control board appointments.

In summary: Like WeWork before it, Soho House is also launching myriad new businesses including coworking spaces that the firm hopes will benefit from the post-COVID “revenge spending” by wealthy consumers desperate for connection. The company intends to use part of the IPO proceeds to pay down debt and strengthen its financial position. At the time of the filing, the company had only $70MM on its balance sheet.

With WeWork going public via SPAC, we can’t help but notice the similarities between the two businesses.

Authored by Isabel Van Brugen via the Epoch Times (emphasis ours),

Dozens detained in federal prison awaiting trial following the Jan. 6 breach of the U.S. Capitol building are being subject to solitary confinement, lack of required medical care, and restricted access to defense counsel, according to two attorneys and the father of a defendant.

Of the close to 500 arrests made so far in connection with the Jan. 6 incident, lawyers John Pierce and Steven Metcalf II, who represent several of the defendants, told EpochTV’s “The Nation Speaks” that some detainees who are being held pre-trial face solitary confinement for 23 hours a day in conditions that are “unconstitutional” and violate “every single basic human right.”

Pierce explained that these individuals are being detained by federal judges under the 1984 Bail Reform Act, which, under certain circumstances, authorizes pre-trial detention if it is believed the individuals are a threat to the community or a flight risk.

“There are about 50 plus or minus that are being detained, that have been in prison for months and will likely remain in prison for many more months until their day in court,” said Pierce.

Ned Lang, the father of a defendant who he said is receiving particularly harsh treatment, said that his son Jake is currently detained in a Washington, D.C. prison in an area called “the hole.”

“He [Jake] has no access to when Steve [his attorney] goes down and talks to him … he has no access to a private interview with an attorney. It’s like you’re in a third-world country, it’s unbelievable,” said Lang. “From what he’s telling me and what I’m hearing, it’s solitary confinement 23 hours and one hour out a day, it’s horrible.”

“These are Americans, we have individual rights, we have our Bill of Rights. This is inhumane treatment.”

Expanding on Jake’s treatment in detention, Metcalf charged that he is being denied his constitutional rights by having restricted access to defense counsel.

“I’m being told the water is black—he has to filter the water through a sock in order to even drink water,” the lawyer said. “In addition to only going out one hour a day, there’s also the weekend where he doesn’t get out at all, and he’s not able to use a shower, get a shave for days on end.”

These conditions for pre-trial detainees, said Metcalf, are unusual.

“The conditions in the D.C. jail in particular are getting to a point of not only being unconstitutional and violating every single basic human right, but they’re getting to a point where people have to speak out, and they have to know about what’s going on,” he added.

Metcalf accused authorities of instilling a “level of fear” throughout all of the inmates, but added that it is unclear who is to blame for the conditions.

“Anything that they do, or if anybody speaks up on their behalf, all of a sudden, they get targeted even further and then get put into a dangerous, unsanitary condition,” the attorney said.

Testifying at an oversight hearing held by the House of Representatives Judiciary Committee last month, FBI Director Chris Wray said that the FBI had divided the tens of thousands of protesters who were at the Capitol on Jan. 6 into three groups: “peaceful, maybe rowdy” protesters who didn’t participate in the breach and made up the biggest group, a second group who engaged in criminal trespass of the Capitol Building, and a third group—the smallest in number—who were responsible for carrying weapons into the Capitol.

Close to 500 arrests among those in the second and third groups have been made so far in connection with the Jan. 6 incident, Wray told the committee. The Department of Justice previously said that the majority of cases are related to entering a restricted building, obstruction of an official proceeding, and civil disorder.

The FBI director also testified that the law enforcement agency considered the events that unfolded on Jan. 6 to be an act of “domestic terrorism.” When asked by Rep. Eric Swalwell (D-Calif.) whether the events could be considered an “insurrection,” Wray replied that he believes that it would be inappropriate to describe the breach as such.

“In my role as FBI director, because that’s a term that has legal meaning, I really have to be careful about using words like that,” Wray said, noting that what he says could affect ongoing criminal cases.

Democratic lawmakers have pushed the narrative that the Jan. 6 breach was an “insurrection,” largely during the January impeachment effort against former President Donald Trump. No one who participated in the breach has been charged with insurrection.

On June 23, Indiana woman Anna Morgan-Lloyd, 49, was put on probation in the first sentence stemming from the Jan. 6 breach.