What are your thoughts on the “rebranding” name change from Membership Collective Group Inc. (ticker MCG) to Soho House & Co Inc. (SHCO)? Will this change create value or is the change superficial?
Some open questions:
Will business operations or resource distributions change in a meaningful way?
MCG first pitched itself as a tech company during their recent IPO in July 2021: ( MCG is “a global membership platform of physical and digital spaces”) and a SoHo House app, but they claim that the name change will be accompanied by a “return to their roots” as a members club with a “member-first focus”.
https://www.ft.com/content/cbc925e1-0915-404b-b5ef-ca8bb62793df
-What will happen to their Soho House app?
-Will they invest more in the co-working spaces or the members clubs going forward?
-How will members react to recent hikes in membership fees (almost doubled to about £2,750.00 per year for members over 27 years old to access all houses)
https://www.sohohouse.com/en-us/pricing
When does “brand” matter to investors in addition to profitability?
Applicants join SoHo house for it's cool brand name. The claim of being a networking space for creatives seems more aspirational than a reality of house members use the space.
But how much do investors care about putting money into stocks that “sound cool”? Halal investing appeals to investors moral compass, but does “cool” investing appeal to institutional or retail investors identity?
The business model started with a strategy to buy failing hotels, and turn them into members clubs. Recently they have adapted their model to increase the types of subscriptions (and the price of subscriptions.
https://www.nytimes.com/2021/07/15/business/dealbook/soho-house-ipo.html
Historical effects of name changes on stock price?
A study of 58 firms across 1981-1985 showed name change did lead to increase in stock price, especially when initial performance was poor (like MCG) and when the firms produced industrial goods (unlike Soho house).
https://www.jstor.org/stable/183841
A more recent study during the 2000s internet surge showed that adding “dot com” or other internet affiliation to existing companies produced returns of around 74 percent for the 10 days after the announcement. This is similar to why many companies are trying to add AI to their brand and mission in 2023.
Will they be profitable in the long run?
The 2021 MCG IPO price was $14, and has steadily declined to the current price around $6.50.
The lingering question is can a company who relies on exclusivity (making it hard to gain membership) scale after going public? Do private membership clubs appeal to a large enough segment of people with disposable income?
Raising membership prices during a recession is a risky choice, but it seems to be paying of in the short term.
Some Q4 Financial Report highlights:
- Fiscal Year 2022 Total revenues increased 73.4% year-over-year to $972.2 million.
- Total Members grew to 226,830 from 211,351 in Q3 2022 and 45.6% year-over-year
- MCG Membership waitlist now sits at an all-time high of ~86,000 and retention rates continue around pre-pandemic levels
Leave a Reply