WSJ : Reddit Files Confidentially for IPO

Reddit Files Confidentially for IPO
Social media company says in blog post it filed paperwork with SEC to go public

Reddit Inc. said it has confidentially filed paperwork with the U.S. Securities and Exchange Commission for an initial public offering, an announcement that comes at the tail end of a banner year for stock-market debuts.

The company said in a blog post that it had started the paperwork with the SEC but didn’t share any further details.

“The number of shares to be offered and the price range for the proposed offering have not yet been determined,” it said in the post. “The initial public offering is expected to occur after the SEC completes its review process, subject to market and other conditions.”

As of August, Reddit said it had a valuation of about $10 billion after raising more than $400 million from Fidelity Investments Inc. In February, the social-media company said it had raised about $500 million at a $6.5 billion valuation.

Reddit has been looking to build on the attention it gained when at the start of the year its WallStreetBets forum became a hot spot for the individual investors who rallied around GameStop Corp. and other stocks.

The episode brought in millions of new users, Reddit CEO Steve Huffman said in its wake, as well as new advertisers, the source of the bulk of the company’s revenue. He has also said that with an IPO, he would want to make Reddit’s share offering more accessible to individual investors.

San Francisco-based Reddit, founded in 2005, is known for its message boards on an array of topics, plus its “ask me anything” digital town halls with celebrities, politicians and subject-matter experts. The company was sold to Condé Nast in 2006, and the magazine publisher’s parent, Advance Publications Inc., spun Reddit off in 2011 and remains a shareholder.

Over time Reddit has grown to outpace rivals such as Digg to become a haven for niche communities to gather and a go-to source of news. Reddit had more than 50 million daily users as of January, according to its website. In August the company said it reached $100 million in advertising revenue in a quarter for the first time, almost triple the prior-year figure, but that it remained unprofitable.

Reddit’s market debut will come after a year for IPOs like no other. More than 900 companies have gone public in 2021, raising nearly $300 billion in 2021, including electric vehicle maker Rivian Automotive Inc., dating app Bumble Inc. and mobile-videogame maker Playtika Holding Corp.

Along with Fidelity, Reddit’s investors include venture-capital firms Andreessen Horowitz and Sequoia Capital, and Chinese technology conglomerate Tencent Holdings Ltd.

In recent years, Reddit has been taking steps to grow by investing in areas such as video and consumer products, as well as by moving into international markets. But like many other social-media companies, it’s also been plagued with content-moderation challenges, including how to stop the spread of misinformation and calls for violence.

In 2020, Reddit banned “The_Donald,” a community devoted to former President Donald Trump, saying moderators frequently ignored content that violated its platform’s rules.

Thanks to the GameStop trading frenzy, Reddit has become a hot spot this year for everyday Wall Street investors seeking advice. At The Wall Street Journal’s Tech Live conference in October, Mr. Huffman said he was hoping a lot of individual investors would participate in Reddit’s initial offering.

“Retail investors are usually the last and probably at the worst price” for initial offerings, Mr. Huffman said at the event. “But the way the market is evolving to be more fair I think is really exciting.”

FT : Italy general strike poses test for Draghi’s premiership

Italy general strike poses test for Draghi’s premiership
Unions to protest against planned tax cuts that they say will benefit higher earners

Workers from two of Italy’s largest trade unions will strike on Thursday to protest against government economic and fiscal policy just days ahead of parliament’s approval of a crucial budget law.

The general strike marks the first big face-off with Mario Draghi, Italy’s prime minister, since the former European Central Bank chief took the helm in February. It highlights the political challenges his government faces in passing crucial structural reforms, including on tax and pensions, to ensure that Italy gets tens of billions of euros from the EU to aid its post-pandemic recovery.

The CGIL and UIL labour unions — which have a combined membership of more than 7.5m people — said the announced budget was “unsatisfactory”. Their main objection is to an envisaged €8bn of tax cuts, which unions say favour higher earners. Retirement rules and labour contracts are other causes of disagreement.

Pierpaolo Bombardieri, the UIL secretary-general, said the government had prioritised political compromise over social demands. “When there’s a [complicated] political mediation, there’s no room for one with the [unions],” he told the Financial Times.

Under the measures announced by the government, workers earning between €28,000 and €55,000 per year will benefit from a reduction in their tax rate, unlike the poorest part of the population. Unions say the government has not devoted enough of its attention to those who were affected the most by the economic fallout from the Covid-19 pandemic.

CISL, Italy’s other main trade union, has said it will not take part in the strike, saying it risks “radicalising positions at a delicate time for the country”.

The strike shows the balancing act for Draghi, who as the leader of a national unity government is trying to pass reforms while rebooting the country’s economy and working to avoid a fourth wave of Covid-19 infections.

Bombardieri said tax cuts should have focused on reducing labour costs that were among the highest in Europe, rather than reducing tax rates on personal income. “In the face of rising inflation, tackling the cost of labour would have increased real wages,” said Bombardieri.

On Tuesday, the government announced it would allocate €300m to mitigate the impact of rising energy costs on lower earning families. A meeting between union chiefs and the government to discuss the pension reform, another sticking point of the discussion, has been scheduled for Monday.

The prime minister’s office said the unions’ choice to stage the strike was “unjustified” while the leader of the League, Matteo Salvini, called union leaders “irresponsible”. A spokesperson for the Democratic party said the party hoped to continue a constructive dialogue with CIGL and UIL after the strike.

Bombardieri said it was “fair to raise questions on situations of social distress”.

“The narrative that everything is going perfectly well and the exclusive focus on the country’s GDP growth figure is misleading,” he said.

>>> US Close Dow +1.08% S&P +1.63% Nasdaq +2.15% Russell +1.65% VIX 19.29 -11.9%

Closing Stock Market Summary

The S&P 500 rallied 1.6% on Wednesday, ending a two-day skid as the market reacted positively to the Fed's policy decision and Fed Chair Powell's press conference. The Dow Jones Industrial Average (+1.1%), Nasdaq Composite (+2.2%), and Russell 2000 (+1.7%) also closed sharply higher.

As anticipated, the Fed left the target range for the fed funds rate unchanged at 0.00-0.25%, said it will double the reduction of asset purchases to $30 billion per month ($20 billion for Treasuries and $10 billion for agency MBS), and signaled three rate hikes in 2022 amid expectations for continued inflation pressures.

The market was pleased to hear Fed Chair Powell talk positively on the labor market and the consumer, even as the Omicron variant poses a risk to the economy. He argued the Fed will tighten policy in a gradual, yet accommodative, way because of robust economic activity that is driving inflation higher. That was an optimistic point of view for the market. 

Investors swiftly bought the dip in the mega-caps, which were dragging the S&P 500 lower by 0.3% prior to the Fed announcement. The heavily-weighted S&P 500 information technology sector went from a 0.7% intraday decline to a sector-leading 2.8% gain by the close. 

The health care (+2.1%), utilities (+1.7%), real estate (+1.5%), and consumer staples (+1.2%) sectors were strong all session. The energy sector (-0.4%), on the other hand, was the only sector that closed lower despite higher oil prices ($70.89, +0.32, +0.5%).

Strikingly, the fed-funds-sensitive 2-yr yield settled higher by just one basis point to 0.67% after hitting 0.72% in the wake of the FOMC statement. With three rate hikes forecasted for next year, the 2-yr yield might have already priced in the Fed's near-term path. The 10-yr yield rose three basis points to 1.46%. The U.S. Dollar Index lost 0.2% to 96.37.

Short-covering activity might have contributed to today's price action. The CBOE Volatility Index was up 7.2% intraday amid increased hedging interest but ended the session lower by 11.9% to 19.29.

Separately, while retail sales for November came up short of expectations, the report suggested that consumers moved up some of their holiday shopping amid media reports of supply shortages. Total retail sales increased 0.3% m/m (consensus 0.8%) on top of an upwardly revised 1.8% increase (from 1.7%) in October. 

In corporate news, Eli Lilly (LLY 275.12, +25.90, +10.4%) climbed 10% after the company provided upbeat FY21 and FY22 EPS guidance. Lowe's (LOW 257.56, +5.10, +2.0%) overcome a negative start attributed to relatively disappointing guidance. Nucor (NUE 108.22, -10.20, -8.6%) wasn't as lucky, with shares losing 8.6% following its downbeat guidance. 

Reviewing Wednesday's economic data:

  • Total retail sales were up 0.3% month-over-month (consensus +0.8%) as were retail sales, excluding autos (consensus +0.9%). On a year-over-year basis, total retail sales were up 18.2% and up 19.5% excluding autos.
    • The key takeaway from the report is that it likely reflects the push to make holiday purchases early given all the reports about supply chain bottlenecks, meaning it might not be as disappointing as it appears at first blush. Tellingly, nonstore retailer sales were flat after increasing 4.1% in October and electronics and appliance store sales were down 4.6% after increasing 3.1% in October.
  • Import prices increased 0.7% in November after increasing 1.5% in October. Excluding oil, import prices increased 0.5% after increasing 0.5% in October. Export prices increased 1.0% after increasing 1.6% in October. Excluding agriculture, export prices increased 1.0% after increasing 1.7% in October.
  • The Empire State Manufacturing Survey increased to 31.9 in December (consensus 25.0) from 30.9 in November.
  • The NAHB Housing Market Index increased to 84.0 in December ( consensus 84.0) from 83.0 in November.
  • Business inventories increased 1.2% m/m in October ( consensus 1.0%) following a revised 0.8% increase (from 0.7%) in September.
  • The weekly MBA Mortgage Applications Index decreased 4.0% following a 2.0% increase in the prior week.

Looking ahead to Thursday, investors will receive weekly Initial and Continuing Claims, Housing Starts and Building Permits for November, Industrial Production and Capacity Utilization for November, the Philadelphia Fed Index for December, and the preliminary IHS Markit Manufacturing and Services PMIs for December.

  • S&P 500 +25.4% YTD
  • Nasdaq Composite +20.8% YTD
  • Dow Jones Industrial Average +17.4% YTD
  • Russell 2000 +11.2% YTD

>>> US After Hours Summary: LEN -4.5% falls on earnings; CALT +56.9% jump on FDA

After Hours Summary: LEN -4.5% falls on earnings; CALT +56.9% jump on FDA approval; GOEV +4.7% rises on news it will accelerate EV production

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: TCOM +0.4%

Companies trading higher in after hours in reaction to news: CALT +56.9% (FDA approves TARPEYO), VRCA +13% (FDA accepts NDA for VP-102 for molluscum contagiosum), APRN +7% (plans for co-branded credit card with Aspiration), GOEV +4.7% (to accelerate and shift production of EVs from Europe to US; increases production guidance and targets; also to explore partnership opportunities with VDL Groep), AFCG +4.6% (increases dividend), SYF +1.7% (increases share repurchase authorization by $1.0 bln), MARA +1.5% (Exec Chairman to retire), AVNS +0.7% (approves $30 mln share repurchase program), V +0.7% (approves $12 bln share repurchase program), SAND +0.3% (declares inaugural dividend of C$0.02/sh), MAXR +0.2% (reserves May 15 - Jun 13 window for WorldView Legion launch)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: IRNT -19%, BLBD -9.8% (also announces $75 mln private placement), LEN -4.5%, NDSN -1.6%, FLXS -0.7% (raises revenue guidance, but lowers margin guidance), CIR -0.3% (also CFO to step down), APG -0.1% (raises FY21 revenue guidance)

Companies trading lower in after hours in reaction to news: SNDX -10% (stock offering), AZO -1.3% (authorizes additional $1.5 bln in share repurchases), STN -0.8% (to acquire Cox|McLain Environmental Consulting), OLED -0.5% (extends supply and license agreements with Tianma Micro-electronics), NGMS -0.2% (signs agreement with Sinsal Sans, granting Lottery access to portfolio of games for Lottery's online site Milli Piyango), EBAY -0.2% (changes definition for GMV), WES -0.1% (names new chairman)

FT : Punch Pubs bought by SoftBank-backed Fortress Investment Group

Punch Pubs bought by SoftBank-backed Fortress Investment Group
Deal values UK company with 1,300 pubs at about £1bn

Punch Pubs has been bought by SoftBank-backed Fortress Investment Group for about £1bn, marking the latest in a string of private equity deals in the UK’s struggling hospitality sector.

The pub group said on Wednesday that Fortress had acquired all of its share capital from its current private equity owner, Patron Capital Partners, which has owned Punch since it took the company private in 2017.

Punch, which was founded in 1997 following the spin-off of Bass Brewery’s pubs, operates about 1,300 pubs in the UK. It previously had more than 3,000 pubs but sold 1,900 to Heineken as part of the Patron deal.

Two people with knowledge of the deal’s terms said it valued the group at about £1bn. Punch’s earnings in the 12 weeks to August 15 were £14.2m and it had £596m in net debt following a £600m financing in June.

Fortress, which has about $54bn under management, is one of several private equity groups, including KKR and Oaktree Capital Management, that are flush with cash and seeking deals in the hospitality sector in expectation of a rapid rebound in demand when pandemic restrictions lift.

KKR invested £300m in the budget gym group Pure Gym this week, while Oaktree has put £200m behind former Greene King boss Rooney Anand’s pub acquisition vehicle, Red Cat. Fortress also owns the US restaurant group SPB Hospitality and this month took a majority stake in the Irish hotel company Prem Group.

Pub groups that own freehold property are a particularly attractive asset for buyout groups.

It means that should trading be restricted or anything go wrong with the operating company, there would still be value in the property, said Graeme Smith, managing director at the consultancy AlixPartners.

“There is a lot of demand for hospitality . . . and for real estate investors, if you look at the different real estate classes, the pandemic has raised longer-term concerns around the likes of office, retail and some housing stock in terms of where are people going to be living,” he added.

Punch’s property was valued at £879m, according to its latest set of accounts for bondholders, and about 93 per cent of its estate is either freehold or long leasehold.

Owen Shirley, an analyst at Berenberg, said the likely rationale for the deal was that Fortress wanted exposure to the UK pub market. “Once you factor in the [value of] the assets, the valuation is relatively cheap,” he said.

Clive Chesser, Punch’s chief executive, said Fortress’ investment was “very positive news”. “Fortress is a hugely experienced investor who understands the strengths of our business and fully buys into our strategic positioning and business plan,” he said.

In July, Punch bought 56 pubs from the listed pub company Young’s.

Cyril Courbage, managing director of Fortress Investment Group, said Punch’s management had done “an exceptional job of navigating the challenges of the Covid crisis while positioning the business for long-term growth and value creation” and that Fortress would “continue to explore other opportunities in this sector and across the UK, Ireland and Europe”.

WWD : Brunello Cucinelli on Maisons, Sustainability, Fair Profitability and Self

Brunello Cucinelli on Maisons, Sustainability, Fair Profitability and Self-Restraint
The Italian entrepreneur explained on Tuesday how he is now calling his company a maison, his sustainability goals and his guidelines "of ideals for life and work," which include "fair profitability."

MILAN — Brunello Cucinelli would like his company to be called Casa di Moda, and believes it has earned the right to be defined so.

“Our values and fashion are representative of a fashion maison,” said the entrepreneur during a pre-Christmas call organized with analysts and the press at the end of trading on Tuesday. “I’ve always been fascinated by maisons such as Hermès and Chanel,” he admitted.

Cucinelli strongly wished to hold the call, which was not originally on the financial calendar, and he opened up about his hopes for the end of the pandemic “in three or four months,” his company’s push into “economic, moral, ethical and cultural sustainability,” and candidly admitted his angst before the G20 in Rome at the end of October, where he was asked by Prime Minister Mario Draghi to speak about humanistic capitalism and human sustainability.

“I couldn’t eat or sleep and was there too early in the morning, but I couldn’t risk getting sick with the wrong food or getting somehow delayed,” he confided. And, worried about his speech, once again, he turned to Saint Augustine for guidance, “letting words come from the soul.”

He said he was “very confident about the future,” but never forgetting “moderation and self-restraint.” In fact, he underscored the importance of “a healthy and sustainable balance between profit and giving back, which, with reconciling work and human privacy, and the desire to repair and reuse, are core values of our Casa di Moda and we have always tried to direct our activity following these high and noble principles.”

Cucinelli, who holds the role of executive chairman and creative director of his company, did not forget he was speaking to analysts, and while preliminary figures will be released in January, he reiterated that the year 2021 was one of rebalancing and that he expected to close the 12 months with a 30 percent growth in revenues. This allowed the company to entirely recover the 10 percent loss in the year 2020 and to “resume its solid and serene path toward the objectives of the 2019 to 2028 plan,” which sees it doubling sales by 2028.

The net financial indebtedness in 2021 is expected to be around 35 million euros, a strong improvement compared to 93.5 million euros as of Dec. 31, 2020, thanks to the cash generation related to operating activities and the strong results in the management of trade working capital.

”We also have solid expectations for the next two years, where we confirm our expectations of a nice, healthy and balanced growth of around 10 percent in both 2022 and 2023,” continued Cucinelli, based on the orders for the spring 2022 collection and the “very positive sales trend” of the fall 2021 season. He ventured into saying that 2023 could be a year “above expectations.”

Cucinelli said growth in 2021 came from all geographies and all distribution channels, pointing to “the great health of the brand, further consolidating its positioning in absolute luxury.”

He underscored the importance of being a ready-to-wear house but also increasingly becoming a lifestyle maison, with the introduction of homewear and, thanks to the collaboration with Oliver Peoples and Luxottica, into eyewear.

He also expects “a clear improvement in margins in 2021 compared to last year, which was strongly affected by the pandemic. In the two-year period 2022-23, we expect to return to profitability levels prior to the start of the pandemic, which have always been based on the values that inspire us: the right growth, the right profit and the right balance between profit and giving back.”

Over the period of the 10-year plan, Cucinelli has also set targets to reduce the company’s greenhouse gas emissions by 60 percent in terms of economic intensity and in absolute terms by 70 percent for scope 1 and 2 emissions and by 22.5 percent for scope 3.

“We are strongly committed to helping to improve the climate change issue on our planet,” underscoring that the brand’s “type of products with high manual skills and craftsmanship considers low emissions. However, we also try with great responsibility and dedication to convey this serious commitment to all our partners.”

The ideas of humanistic capitalism and human sustainability are foundations of the company, which translate into “working and living in harmony with creation.” Cucinelli listed a set of 10 guidelines of “ideals for life and work.”

Among some, these included the love and respect for the Earth, without using more resources than it is necessary or natural. “We always act as loyal and affectionate guardians of creation and we believe in the moral and economic dignity of human beings.” Cucinelli highlighted the importance of “fair profitability and harmony between profit and giving back to the community. We believe in universalism and we act displaying great respect for all civilizations.”

WWD : Isabel Marant Said in Play Again: Sources

Isabel Marant Said in Play Again: Sources
Montefiore Investment took a 51 percent stake in the French fashion house in 2015.

Could Isabel Marant, who sold a 51 percent stake to a private equity firm in 2015, be in play again?

According to sources, Montefiore Investment has tasked American firm J.P. Morgan with selling its stake. It could not be immediately learned if Marant might also tender additional shares in the Paris-based fashion house she created. Its other original partners are Nathalie Chemouny and Sophie Duruflé.

Contacted by WWD, a spokeswoman for Montefiore said the company “doesn’t comment on rumors.”

A Marant spokesman echoed a similar message: “The maison Isabel Marant is regularly solicited. In this particular context, we do not comment on market rumors.”

J.P. Morgan also declined to comment.

The brand is said to be highly profitable, having generated 60 million euros in EBITDA in 2019 on net revenues of 300 million euros. According to sources, profitability accelerated in 2021.

The company has almost doubled in size since 2015, with its store network ballooning from 10 to 70 during the period.

Europe’s luxury conglomerates LVMH Moët Hennessy Louis Vuitton and Kering — usually the first names on everyone’s lips when a brand comes on the market — may not be tempted by Marant, given its medium scale and positioning a notch below luxury.

Sources said Mayhoola for Investment, the Qatari fund behind Valentino, could take a look along with the likes of Capri Holdings or private equity giant KKR. (Capri declined to comment and KKR could not be reached immediately). It is understood, the Marant business is heavily weighted to the U.S., a burgeoning market for fashion and luxury goods.

Founded in 1994, the label is credited with inventing the bohemian Parisienne hipster-meets-tomboy look. Quilted jackets and skinny motorcycle pants are among its signatures in apparel, while cult accessories include the wedge sneaker, launched in 2012. The style spurred a sea of knock-offs and became one of the recent defining footwear trends.

The brand, which counts Beyoncé, Gwyneth Paltrow and Kendall and Kylie Jenner among its devotees, has been opening stores and expanding into new categories like eyewear and skiwear.

In October, the company revealed plans to more than double its retail presence in China over the next four years.

Last June, it launched a secondhand site that will take donations of used clothing from the label in exchange for vouchers, offering a new model for an industry under pressure to get involved in the post-sale life cycle of their products.

The Marant acquisition was the first investment in fashion for Montefiore, whose portfolio includes online travel agencies MisterFly and Cruiseline, fitness chain Les Cercles de la Forme and domain name provider Gandi.

Montefiore seems to be bringing the brand back out into the dealmaking scene at a good time. The stock market — which helps set the price for all companies — is still at a high and European brands are getting particular interest.

This month, John Idol — who leads Capri Holdings as chief executive officer and chairman and built the company by cobbling together Michael Kors, Versace and Jimmy Choo — said he remains on the watch for deals in Europe.

“We believe that we will continue to focus only on the luxury area, which predominantly means, and I would almost say exclusively means, European luxury companies that really have the ability to be at minimum $1 billion because it’s not really worth our time, energy and effort to do something that will only be hundreds of millions of dollars, even though it’s a very sizable business,” Idol said. “It takes the same synergy and effort to put that into a few hundred million as it does $1 billion-plus business.

“So we’re active,” Idol said. “We are actively looking now. We’re actually even involved in select conversations, nothing is on the horizon, but we are active.”

And clearly, he’s not the only one.