Owners considering selling their business face the specter of a purchase price reduction that could drop net proceeds by as much as 20 percent. Currently, the capital gains rate is 23.8% for most sales, counting the net investment income charge. During his campaign, President Joseph Biden proposed increasing the top long-term capital gains tax rate to 39.6% — equal to his proposed top tax rate for ordinary income. The 3.8% surtax for net investment income would continue, lifting the effective long-term capital gains rate to 43.4% for most business sellers, an increase of 19.6% over the current rate.
The reasons for considering tax increases are obvious. President Biden has an ambitious social agenda that includes fighting the coronavirus at a time when the national debt stands at $27.9 trillion (excluding new stimulus packages under consideration). Forbes calculates that we added $3.1 trillion to the deficit through October 2020 alone, including over $2.6 trillion related to COVID-19 relief. The two big questions, then, are will Congress raise the capital gains rate and, if so, when?
During his campaign, Biden discussed raising federal revenues through various tax raises. However, most pundits believe Biden will not propose significant tax increases in his “rescue plan” legislation expected to be filed this month. But, a recent report by KPMG’s tax unit suggests that Biden will look to include “revenue raisers” when he files his second major legislation, the so-called “recovery package,” which may arrive in Congress as soon as March. KPMG and others point out that Biden’s appetite to raise taxes will depend on the state of the economy and that some legislators in his narrow majority will likely oppose aggressive tax increases in the near term.
Even if he does not have the political capital to raise taxes significantly in the near term, he faces real pressure to do so before November of next year. On January 5th, Raphael Warnock and Jon Ossoff won their senate runoff elections in Georgia, giving Democrats the narrowest possible control in the Senate, and adding to control of the White House and the House of Representatives. However, this bi-cameral control may only last until the midterm elections in November 2022 when 34 seats are up in the Senate (as are all seats in the House). It is likely that Biden will not risk his agenda by waiting to raise taxes until after November 2022.
While the economy has shown signs of resilience, it is likely to be stronger once the majority of Americans are vaccinated, which should be by the end of the summer. With a return to full commercial activity, and an expected economic surge due to pent-up demand, it is reasonable to assume the economy will heat up significantly in the back half of 2021 and into early 2022. This would give Biden and the Democrats political cover to lift rates in advance of the midterm elections. Given that the Senate requires 60 votes to overcome a filibuster but a simple majority to pass fiscal legislation through budget reconciliation, a major capital gains rate hike could be on the agenda this time next year during budget reconciliation. If this proves to be true, selling one’s business in 2021 before the change may make a significant net difference.
It is important to note that the Supreme Court has ruled that changes to tax laws can be applied retroactively. Therefore, it is possible that Congress enacts a new capital gains law late in 2021 that applies to transactions consummated earlier in the year, perhaps going back to January 1. Retroactive tax increases are rare, but not unprecedented. For example, the Omnibus Budget Reconciliation Act of 1993 was enacted in August 1993 and applied higher income tax rates to some individuals and corporations effective retroactively to January 1, 1993. Still, most believe retroactive application of a meaningful tax increase is unlikely this time around given the sensitive state of the economy. A raise in the capital gains rate seems most likely either later this year, effective as of January 1, 2022, or during next year’s budget reconciliation process.
Note: Consensus does not provide tax or legal advice. Business owners considering selling are strongly encouraged to discuss this important issue with their tax advisors.
Headlines of the Week
Blackstone-backed dating app Bumble raises $2.2 billion in U.S. IPO
Bumble Inc, a dating app operator backed by buyout firm Blackstone Group Inc, sold shares in its initial public offering (IPO) on Wednesday at $43 apiece above its target range, to raise $2.2 billion. The IPO gave the Austin, Texas-based company a market capitalization of more than $7 billion. Bumble sold 50 million shares after raising its share offering several times, previously aiming to sell 45 million shares at a target price range $37-$39. Some dating apps like Bumble have flourished even under COVID-19-related social distancing, as people who stay at home turn to instant messaging to seek romance. Bumble, which also owns the Badoo dating app, said it expects to record up to $541.5 million in revenue between January and December 2020, up 11% from the prior year driven by growth in paying customers. The company had 42 million monthly active users as of the end of September, out of which 2.5 million were paying users, up 22% from the prior year. It had $900 million in debt.
Hormel Foods to acquire Kraft Heinz’s nut business
Hormel Foods is acquiring Kraft Heinz’s nut business, which includes the Planters brand, for $3.35 billion in cash. The proposed deal is subject to regulatory approval and expected to close in the first half of 2021. Included in the transaction are most products sold under the Planters brand, including mixed nuts, trail mix, Nut-trition products, Cheez Balls, Cheez Curls and Corn Nuts branded products. The agreement also includes global intellectual property rights to the Planters brand. Manufacturing facilities in Fresno, Calif.; Fort Smith, Ark.; and Suffolk, Va., also will be part of the transaction. The Planters nut snack business had sales of approximately $1.1 billion in calendar 2020.
Apparel & Footwear
LuLaRoe to pay $4.8M to settle pyramid scheme lawsuit
In a hit to the multilevel marking company, the Washington State Office of the Attorney General last week stated that LuLaRoe will pay $4.75 million to settle a lawsuit that asserted that the company was operating a pyramid scheme. The settlement, according to court documents, doesn’t constitute “evidence or an admission by any party regarding the existence or non-existence of any issue, fact or violation of any law alleged by Washington.” In a separate press release, LuluRoe said it “denied, and continue to deny, any wrongdoing, and the settlement releases any and all claims the State of Washington may have had” against the company. The resolution prohibits LuLaRoe from operating a pyramid scheme in the state of Washington and says that the company “must be more transparent with retailers to avoid future deception,” per the government office press release.
Former Urban Outfitters chief exec tapped as CEO of PVH Americas
PVH Corp. has added a new role to its leadership team. The parent company of Tommy Hilfiger, Calvin Klein and other brands has appointed Trish Donnelly, former chief executive of Urban Outfitters Group, to the new role of CEO of PVH Americas, effective Feb. 16. Donnelly will have responsibility for the Calvin Klein, Tommy Hilfiger and Heritage Brands businesses in the Americas and for the global Calvin Klein brand. As previously reported, Donnelly left Urban Outfitters at the end of January, after serving seven years with the company. Prior to Urban Outfitters, Donnelly oversaw J. Crew Group’s e-commerce business and spent over a decade at Ralph Lauren in product and merchandising roles. She also held senior leadership and operation positions at Steven Alan and Cole Haan.
Mall owner Simon seeks to block Ascena Retail Group bankruptcy settlement over lease concerns
Simon Property Group Inc. has filed papers in U.S. bankruptcy court trying to block Ascena Retail Group’s Chapter 11 reorganization out of a fear that it will allow Sycamore Partners, which bought several Ascena brands out of bankruptcy, to close more stores, weakening a master lease agreement the mall operator originally negotiated with Ascena. An affiliate of private equity firm Sycamore bought Ascena brands Ann Taylor, Lane Bryant, Loft and Lou & Grey in December for $540 million. The sale to Premium Apparel LLC followed Ascena’s Chapter 11 bankruptcy filing in July and earlier sale of its Catherine’s, Justice and Dressbarn brands. The Sycamore entity had agreed to keep at least 900 stores operating, Chain Store Age reported. But paperwork filed with the U.S. bankruptcy court for the Eastern District of Virginia voiced Simon’s concern that, “the purchaser has laid bare its intention to significantly reduce the business’ physical store presence in the near term,” making Sycamore “a significantly less creditworthy lessee than the entity with which the Simon Landlords originally contracted.”
Athletic & Sporting Goods
Fitness firms Beachbody, Myx to go public via $2.9 billion SPAC deal
Fitness companies Beachbody LLC and Myx Fitness LLC will go public through a three-way merger with a blank-check firm affiliated with former TikTok chief Kevin Mayer, valuing the combined entity at around $2.9 billion. Beachbody said on Wednesday that on-demand, interactive cycling provider Myx will become a part of the parent, The Beachbody Company, which will operate three brands: Beachbody On Demand, Openfit and Myx. The deal will be supported by a private investment of $225 million led by institutional investors such as Fidelity Management & Research Company LLC and Fertitta Capital. Founded in 1998 by Carl Daikeler and Jon Congdon, Santa Monica-based Beachbody has over 3 million subscribers and offers more than 2,700 on demand videos, its website showed.
Sleeping Bear Purchases Venice Longboards
Sleeping Bear Capital, a founder-focused private equity firm, announced that it has acquired Venice Longboards, a leading skateboarding e-commerce and lifestyle brand that specializes in electric longboards. Venice Longboards founder, Brett Casaccio, will continue in his current role and maintain an ownership interest in the company. Following the acquisition, Sleeping Bear will work closely with Casaccio on key growth initiatives.
Under Armour pursues plans to break ties with some retailers in push for more profitable sales
Under Armour said it is forging ahead with its turnaround strategy to pull its sneakers and sweat-wicking tops out of struggling middlemen and instead pour investments into its own stores and website. Under Armour revealed plans late last year to break with some retailers, primarily in North America, starting in the back half of 2021, as it doubles down on its strategy to sell more directly to consumers. It has said it aims to leave 2,000 to 3,000 partner stores, although that would still leave it with 10,000 by the end of 2022. The company didn’t identify which retailers it will break ties with as part of this plan. Under Armour’s merchandise is sold in a number of U.S. department stores, specialty sporting goods stores and off-price retail locations, in addition to mom-and-pop businesses.
Cosmetics & Pharmacy
L’Oréal Sales Accelerate In Q4
L’Oréal’s sales accelerated in the fourth quarter of 2020, bolstered by the group’s Active Cosmetics division and emerging markets, which helped the group to widely beat analysts’ expectations. “It’s a nice send-off for Jean-Paul Agon, as fourth-quarter 2020 organic top-line growth of 4.8 percent and full-year 2020 operating margins of 18.6 percent handsomely beat consensus — of 2.1 percent and 18 percent [on a like-for-like basis], respectively — making for a solid end to a very challenging year,” said Eva Quiroga, managing director of Bank of America. Agon, as previously reported, on May 1 will pass the chief executive officer title at L’Oréal to Nicolas Hieronimus and remain on as company chairman. The maker of Lancôme, Kiehl’s and Garnier products on Thursday night, after the close of the Paris bourse, said sales in the three months ended Dec. 31 were 7.88 billion euros, flat in reported terms.
Indian Beauty Brand Sugar Cosmetics Raises $21 Million Series C
India’s digital-first cult beauty brand Sugar Cosmetics raised $21 million in Series C funding from Elevation Capital and existing investors to fuel omni-channel growth.
Sugar Cosmetics was founded in 2015 by Vineeta Singh and Kaushik Mukherjee as a direct-to-consumer beauty brand with products specifically created to suit Indian skin tones. While e-commerce still contributes to half of the business’ revenue, Sugar has built an omni-channel distribution network that includes 10,000+ retail outlets across 130+ cities, taking its award-winning range to the doorstep of beauty enthusiasts across the country as one of the fastest-growing premium beauty brands in India. Apart from investments in keeping the brand’s fast-moving product range ahead of the curve, the funds are expected to be used in building both digital and retail distribution to further reach existing and new geographies.
Coty Sales Drop 16% in Holiday Quarter
Coty Inc. may have seen a 16 percent net sales decline in the holiday quarter, but chief executive officer Sue Nabi said results in terms of profit and net debt were ahead of expectations. “We are maintaining the momentum that we had in the first quarter during the second quarter,” Nabi told WWD in an interview Tuesday morning. Revenues were “in line with expectations,” and were driven by “the good news of the luxury division,” she said, calling out Marc Jacobs Perfect — the number-one fragrance launch of 2020 — as a key success. The company has started to reduce its debt leverage thanks to the closing of the Wella deal, and accelerated e-commerce by 40 percent in the quarter. It now stands at between 19 to 20 percent of the total business, Nabi said.
Shiseido Posts 2020 Net Loss, Looks to Brighter Future
Shiseido posted a net loss in its most recent fiscal year, due mainly to factors related to the COVID-19 pandemic, the company said Tuesday. In addition to a drop in sales and operating profit, extraordinary losses resulting from compensating employees on leave and maintenance costs for store counters and factories pushed the company into the red. In the 12 months ended Dec. 31, Shiseido’s net loss totaled 11.66 billion yen, or $110.6 million. In the 2019 fiscal year, it had made a net profit of 73.56 billion yen. Operating profit plummeted 86.9 percent year-over-year, coming in at 14.96 billion yen. The company said this was due to a drop in margins resulting from weaker sales, but that effective cost-management initiatives had prevented an operating loss. Net sales for the year totaled 920.89 billion yen, a year-over-year decline of 18.6 percent. Shiseido said sales were affected by the spread of COVID-19 across all regions.
Discounters & Department Stores
Target’s activewear brand generates $1B in first year
A little over a year after Target launched All in Motion to compete with Lululemon and other athletic powerhouses, the activewear label achieved the company’s goal of generating $1 billion in its first year. All in Motion, a brand that touts “inclusivity, quality and sustainability,” is Target’s 10th billion-dollar private label, according to a company press release. The activewear and sporting goods brand was launched last year on Target’s website on Jan. 17 and in stores nationwide on Jan. 24, according to its initial announcement.
Walmart and Sam’s Club pharmacies will begin administering COVID-19 vaccines through the U.S. Federal Retail Pharmacy Program on Feb. 12, 2021. More than 1,000 Walmart and Sam’s Club pharmacies in 22 states are receiving federal vaccine allocations this week, with an emphasis on locations that reach customers in underserved communities with limited access to health care. In addition to the 22 states, Walmart and Sam’s Club is also currently administering vaccinations under the state allocation in 11 states, the District of Columbia and Puerto Rico. While initial vaccine supply is limited, Walmart and Sam’s Club pharmacists and technicians stand ready to help expand vaccine access across the country.
Walmart+ gains traction 5 months after launch
Five months after Walmart’s membership program, Walmart+, was released, data indicates that it has garnered between 7.4 million and 8.2 million members, signaling a promising start for a potential Amazon Prime rival, according to Consumer Intelligence Research Partners analysis released Wednesday. Customers spend an average of $1,000 at Walmart.com per year, which is “remarkably similar to the long-term figure for Amazon,” said Josh Lowitz, partner and co-founder of CIRP. Walmart+ members currently account for about 13% to 14% of total Walmart.com shoppers as of Jan. 30, per the report.
Simon Property Group expects suburban boom to fuel growth
The American suburb is poised for a comeback, and malls run by Simon Property Group are set to benefit, CEO David Simon said last week, predicting in a conference call with analysts that “the suburbs are going to be hot” and “where the action is in the future.” “I think you’re going to see a movement toward suburbs, and that will … spell a good opportunity for us,” he said, according to a Motley Fool transcript. Although there has been much discussion about people moving away from cities in order to have more space, both indoors and out, while they’re forced to stay home during the pandemic, it’s unclear how big that movement has been, when exactly it started or how long it might last.
Emerging Consumer Companies
CBD wellness brand Beam raises $5 million
Beam, the direct-to-consumer wellness brand with THC-free CBD product offerings, announced that it had raised a $5 million Series A. The round was led by C2 Ventures, with participation from existing investors Obvious Ventures Camwood Capital, and new investors The Yard Ventures and Litani Ventures. A number of professional athletes, including Baker Mayfield, Danica Patrick, Kevin Hayes, Brooks Laich, have also invested. Beam also announced its official entry into the functional beverage space with the launch of elevate, a powdered stick hydration offering and first non-CBD wellness product category for the brand.
Maisonette, marketplace for children’s products, raises $30 million
Maisonette, a leading children’s brand behind a growing products marketplace, raised $30 million in Series B funding. The round was led by G Squared with participation from existing investors NEA and Thrive Capital, and will be used to build the curated assortment from more than 900 brands across apparel and accessories, home furniture and decor, toys, gear and wellness. With the new funding, Maisonette has raised more than $50 million since its inception, including a $15 million Series A round led by NEA in 2018.
Gravity, sleep brand and leader in weighted blankets, acquired by Win Brands Group
Gravity, the sleep brand and the leader in the weighted blanket category, was acquired by Win Brands Group. Founded in 2017 with a Kickstarter campaign that raised $4.7 million, Gravity was the first to commercialize the weighted blanket, which had been used in treatment settings for decades to reduce stress and anxiety and to improve sleep. The company has since expanded into other sleep products. Along with the transaction, Win Brands announced that it raised $50 million from Assembled Brands and Oaktree Capital Management.
Grocery & Restaurants
Price Chopper/Market 32, Tops Markets to merge
Northeastern grocers Price Chopper/Market 32 and Tops Markets plan to merge, creating a supermarket retailer with nearly 300 stores in six states. Financial terms of the deal, announced Monday, weren’t disclosed. Plans call for Scott Grimmett, president and CEO of Schenectady, N.Y.-based Price Chopper/Market 32, will serve as CEO of the merged company and on its board of directors, overseeing the operations 292 Price Chopper, Market 32, Market Bistro and Tops Markets stores in New York, Vermont, Connecticut, Pennsylvania, Massachusetts, and New Hampshire. Both supermarket chains will retain their main offices in Schenectady and Williamsville and continue to be managed locally by their respective leaders.
Activist investor calls on TreeHouse Foods to consider its options
Shares of TreeHouse Foods surged nearly 23% on Feb. 10 after activist investor Jana Partners issued a filing with the US Securities and Exchange Commission urging the company to explore a strategic review, including a potential sale. New York-based Jana, which holds an approximately 7.5% stake in TreeHouse Foods, said it has increased its holdings in TreeHouse because “they believe the shares are undervalued and represent an attractive investment opportunity with (TreeHouse) nearly three years into a comprehensive turnaround.” “Jana has had, and intends to continue to have, constructive discussions with (TreeHouse’s) board of directors and management regarding avenues to resolve (TreeHouse’s) undervaluation and total stockholder return, including evaluating a sale of (TreeHouse), operations, capital allocation, corporate governance and compensation practices,” Jana noted in the Feb. 10 SEC filing. Additionally, Jana has nominated Meredith Adler, John Paul Gainor Jr. and Charles Myers as potential directors for TreeHouse’s board.
Home & Road
Tempur Sealy 4Q sales climb 21%
Mattress producer Tempur Sealy International reported net income of $144.7 million for the fourth quarter ended Dec. 31, 2020, a 213% increase as compared with net income of $46.3 million in the same period last year. Fourth quarter sales for the company climbed 21% to nearly $1.06 billion, an increase of more than 21% compared with the same quarter last year when the company posted net sales of $873.2 million. For the full year, net earnings were $348.8 million, or $1.64 per share, compared with net income of $189.5 million in 2019, an increase of 84.1%. Net sales for the year end were $3.68 billion, an 18.4% increase from $3.1 billion reported last year. “Our strong fourth quarter sales performance was driven by our leading competitive position, supported by consumers prioritizing home and wellness investments,” said Scott Thompson, chairman and CEO of Tempur Sealy.
Mastercard data shows home furnishings spend up 16.2%
According to Mastercard’s SpendingPulse, the home furniture and furnishings categories experienced the strongest growth of any sector over the recent holiday season. The report measures overall retail spending trends across all payment types including cash and check, in addition to credit card sales. Home furniture and furnishings experienced the strongest growth compared with 2019 sales, with total spend up 16.2%. According to Mastercard, the home furnishings category grew 31% online. And, in addition, the home improvement segment was also up 14.1%, with its e-commerce sales up 79.7% year-to-year. Overall sales for all categories increased 3% over the holiday season, with online sales growing 49% compared with 2019 numbers, according to the Mastercard data.
Leggett & Platt reports 3% increase in Q4 sales
Leggett & Platt reported a 3% increase in fourth quarter sales but a 10% decline in full year sales due to double-digit declines in bedding and specialized products and a 6% decline in furniture, flooring and textile products. The company reported fourth quarter sales of $1.182 billion, up 3% from $1.44 billion during the same period in 2019. Full year sales were $4.28 billion, down 10% from $4.75 billion in 2019. Net earnings for the quarter totaled $103.2 million, up 18.8% from the $86.9 million reported during the fourth quarter of 2019. Net earnings were 76 cents per diluted share compared with 64 cents last year.
For the full year, net earnings were $247.7 million, or $1.82 per diluted share, compared with $333.9 million in 2019, a nearly 26% decrease.
Jewelry & Luxury
LVMH Fenty fashion house on hold
LVMH Moët Hennessy Louis Vuitton, and musician and fashion icon Rihanna, have hit pause on the Fenty fashion house, they confirmed in a statement Wednesday. “Rihanna and LVMH have jointly made the decision to put on hold the [ready-to-wear] activity, based in Europe, pending better conditions,” a spokesperson said by email. The news was first reported by Women’s Wear Daily. On Wednesday, Rihanna’s lingerie brand Savage x Fenty in an emailed press release also announced a “heavily oversubscribed” $115 million Series B funding round led by L Catterton’s Growth Fund (co-founded by LVMH chief Bernard Arnault) and joined by Marcy Venture Partners, Avenir and new investors including Sunley House Capital.
U.S. Places Sanctions on Three Burmese Gem Sellers
Following the recent military coup in Myanmar (formerly Burma), the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) has placed sanctions on three Burmese gem companies. The OFAC-sanctioned companies are Myanmar Ruby Enterprise, Myanmar Imperial Jade Co., and Cancri (Gems and Jewelry) Co. A White House statement said the three companies were “wholly owned subsidiaries of a conglomerate owned or controlled by” the country’s military. At press time, it wasn’t clear how the ban targeting these three companies would affect the overall market for ruby and jade from Myanmar.
Two Digitally Minded Execs Join Signet’s Board
Showing the growing importance of digital transformation to Signet Jewelers, America’s largest jewelry retailer has appointed two new directors with extensive digital experience to the company’s board of directors. The appointments of André Branch and Dontá Wilson will increase Signet’s board from 10 members to 12, 11 of whom are independent. (Current CEO Gina Drosos is the sole non-independent member). Since 2020, Branch has served as the senior vice president and general manager of MAC Cosmetics North America, a division of Estee Lauder Companies, where he oversees the brand’s local operations. He previously worked as senior vice president of e-commerce and digital operations at another fragrance company, L’Oréal USA.
Diamond Industry Ends Year From Hell On Upbeat Note
The COVID-19 pandemic caused diamond jewelry sales to fall 15% during 2020, but the industry saw significant sales growth during the last quarter, according to the 10th annual Global Diamond Report, coproduced by Bain & Co. and the Antwerp World Diamond Centre. Diamond jewelry sales climbed 5 to 10% in the U.S. during the fourth quarter of 2020 over the prior year, while they climbed 15 to 20% in China, the report found. Despite the struggles of the pandemic period, diamond jewelry performed better in 2020 than the overall personal luxury market, which saw sales fall 22%.
Office & Leisure
Electronic Arts to buy Glu Mobile for $2.4 billion in mobile gaming push
Electronic Arts Inc said on Monday it would buy Glu Mobile Inc for $2.4 billion, bolstering its mobile platform with the addition of games such as “Design Home”, “Covet Fashion”, and “MLB Tap Sports Baseball”. The U.S. video game developer has offered $12.50 in cash for each Glu share, a premium of about 33% to its closing price on Monday. The deal, which is expected to close in the quarter ending June 30, gives Glu an enterprise value of $2.1 billion. San Francisco-based Glu received multiple takeover offers last year as its stock has underperformed those of its gaming peers, a source familiar with the situation said. EA, known for its sports gaming franchise, expects to expand its mobile gaming titles through the acquisition and attract more female gamers through the casual game portfolio Glu owns, including “Kim Kardashian: Hollywood”. EA has been on a buying spree as it sits on a strong balance sheet and looks to scale with more gaming titles. In December, it acquired UK-based Codemasters for $1.2 billion.
Poshmark enters into the pet category
In a move to expand its reach, secondhand marketplace Poshmark announced Thursday it’s launching into the pets category. The new category is for “owners who are seeking a simple, social and sustainable way to shop and sell,” and includes new and secondhand pet accessories, supplies and toys for a variety of animals. Entering into a new product space demonstrates Poshmark’s long-term strategy to scale the company via category expansion. Even prior to today’s formal entrance into the pet category, Poshmark observed users selling toys, leashes, harnesses, beds and costumes for pets. But it may not come as a surprise, considering that 67% of Americans are pet owners. Indeed, the pet category is one segment of the retail industry that has succeeded despite economic uncertainty brought on by the COVID-19 pandemic.
Roblox says revenue was higher than previously reported and pushes direct listing to March
Roblox, the kids’ gaming company that’s getting set to go public, released an updated prospectus on Thursday with restated financials because of a “material weakness” in its reporting. Revenue through September jumped 70% from a year earlier to $613.9 million, the company said. In its prior prospectus in mid-January, Roblox said revenue over that stretch climbed 68% to $588.7 million. Its revised net loss for the period was $194.5 million, down from $213.3 million as reported before. Roblox said that it now expects its direct listing to take place in March, rather than February as it indicated in a prior filing. Roblox had originally planned to go public through a traditional IPO in December, but it delayed its debut a first time and changed to a direct listing after Doordash and Airbnb priced their IPOs well below where the stocks opened. Roblox, which has one of the top-grossing apps on Apple and Google devices, makes money by allowing its millions of users to buy virtual currency called Robux that can be used to dress up their avatar or advance in games.
Rover Announces Plans to Become a Public Company via a SPAC, Nebula Caravel Acquisition Corp.
A Place for Rover, Inc. , the world’s largest network of five-star pet sitters and dog walkers, has entered into a definitive business combination agreement with Nebula Caravel Acquisition Corp. Caravel is a publicly traded special purpose acquisition company sponsored by True Wind Capital. Upon closing of the transaction, Caravel will be renamed Rover Group and remain Nasdaq-listed under the ticker symbol “ROVR”. Rover, the leading online marketplace for pet care, connects pet parents with local, high-quality pet care providers who offer a wide range of services, including boarding, in-home pet sitting, doggy daycare, dog walking, drop-in visits, and grooming. Rover built a simple, easy-to-use platform and mobile app to enable pet parents to discover, book, pay, and review loving pet care providers online. The transaction values Rover at an enterprise value of approximately $1.350 billion.
Technology & Internet
TikTok sale to Oracle, Walmart reportedly on hold as Biden administration reviews
Oracle and Walmart’s plan to buy TikTok’s U.S. operations has been pushed back indefinitely, as President Joe Biden reviews former president Donald Trump’s efforts to address potential security risks from Chinese tech companies. Trump pushed TikTok to find an American buyer by threatening to ban the popular video app due to concerns that its Chinese parent company ByteDance could hand over U.S. users’ data to the Chinese government. TikTok has denied that this is the case or that it would it hand over U.S. data if asked by Chinese officials. Servers for the app are not based in China and so far, many of the concerns still appear to be hypothetical. TikTok ultimately struck a partnership deal with Oracle and Walmart that would include the U.S. businesses buying a stake in the app and providing secure technology. Under the terms of the deal, ByteDance would still own 80% of the business. Still, Trump said in September that he had approved the deal in principle. But the arrangement has stalled as TikTok fought with the Trump administration in court over the attempted ban.
Tesla buys $1.5 billion in bitcoin, plans to accept it as payment
Tesla announced it has bought $1.5 billion worth of bitcoin. In a filing with the Securities and Exchange Commission, the company said it bought the bitcoin for “more flexibility to further diversify and maximize returns on our cash.” Tesla also said it will start accepting payments in bitcoin in exchange for its products “subject to applicable laws and initially on a limited basis.” Tesla’s move into bitcoin represents an investment of a significant percentage of its cash in the investment. The moves raised immediate questions around CEO Elon Musk’s behavior on Twitter recent weeks, where he has been credited for increasing the prices of cryptocurrencies like bitcoin by posting positive messages that have encouraged more people to buy the digital currencies.
Finance & Economy
Jobless claims worse than expected as pandemic-related filings surge
The pandemic era has provided a long struggle for the jobs market to get back to its previous level. Nonfarm payrolls increased by just 49,000 in January, while the unemployment rate fell to 6.3% primarily due to a decline in the labor force. Continuing claims for benefits, which run a week behind the weekly number, also declined, falling 145,000 to 4.54 million, the lowest total since March 21, 2020. However, the total of those receiving benefits across all program jumped to 20.44 million due to a surge in filings for two pandemic compensation programs: for those who wouldn’t otherwise receive benefits and for those whose regular benefits have run out. Enrollment under the special pandemic programs rose by nearly 2.7 million for the week ended Jan. 23.
Consumer credit growth slows in December
U.S. consumer borrowing grew at a slower pace in December, ending a year when the coronavirus pandemic kept spending in check. Total consumer credit increased $9.7 billion to $4.18 trillion in December. That’s a 2.8% annual growth rate and follows a revised 4% growth rate in the prior month, according to Federal Reserve data released. Economists had been expecting a $12 billion gain, according to the Wall Street Journal. Revolving debt, mainly credit cards, fell 3.6% rate in December. That’s the ninth decline in the past ten months. Revolving credit decreased 11.2% for all of 2020. That’s the first decline since 2012. Nonrevolving debt, typically auto and student loans, rose at a 4.8% rate in December after a 5.5% gain in the prior month. The nonrevolving category is less volatile. Nonrevolving credit rose at a 3.9% pace over 2020.
