SoulCycle: A Fast Paced IPO, but No Finish Line for Dividend Investors
Calder Lamb Jul 31, 2015
SoulCycle is an IPO that could pay handsomely for short-term investors, but is unlikely to produce a dividend in the long run. The company inspires a cult-like following through its innovative spin classes, social media engagement, and elite clientele. The SoulCycle business model is dependent upon new location openings for growth. Because of the service’s high price point, new locations will only be profitable in wealthy neighborhoods. SoulCycle has set the stage for an exciting IPO day but by looking at industry peers, it is clear the company is unlikely to reward dividend investors.
SoulCycle is for the wealthy elite of America. The company’s workout classes are number six on therichest.com’s list of the ten most expensive workouts. If the prices don’t impress you, then maybe the celebrity instructors will. As you can see from the picture below, SoulCycle only has store locations in extremely affluent areas.
The financials for SoulCycle are healthy and growing impressively, but this is expected for an IPO. What is more difficult to judge is if the company will continue that impressive growth after IPO. According to the company’s public filing, almost all revenue growth comes from the opening of new SoulCycle locations. The company currently has 38 locations and plans to expand to 250 with the money raised from its IPO.
But not everything is rosey, SoulCycle is currently going through a class action lawsuit for not paying their instructors enough.
Will SoulCycle Pay Dividends, If So, When?
Based upon research of industry peers, SoulCycle is unlikely to pay dividends in the foreseeable future. Because the company’s revenue growth is directly related to the amount of new locations they open, SoulCycle must continue to pour money into opening new locations and marketing. While SoulCycle is unlikely to pay a dividend, it might be worthwhile to invest in the IPO if you can get in early. The IPO’s of Fitbit, Lululemon, and Under Armour where all wildly successful in their first few days of trading. Lululemon and Under Armour were IPO’ed by Goldman Sachs, who is also assisting SoulCycle with their IPO.
Image courtesy of nuttakit at FreeDigitalPhotos.net
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