August 2023 Issue
Summer, believe it or not, is already starting to fade into fall as the mornings grow just a little bit darker. Still, the rest of 2023 is shaping up to be ripe with opportunity. In capital markets, a late bloom of listings is expected to last into 2024. Media companies are facing a rough patch as they negotiate with talent, but that’s not stopping the blockbuster train of new releases like Barbie. Corporate culture is also continuing to change with the seasons as Gen Z workers reshape the workplace into the values they hold dear, including work/life balance. And even real estate is showing some signs of a late summer burst as new home sales lift off against the backdrop of high interest rates.
See all the details below.
Capital Markets
The U.S. initial public offering (IPO) market is warming to the news that a soft landing is in the offing. Inflation is finally dropping after a year of soaring prices. This year’s unemployment rate has remained stable at around 3.5%, and consumer spending remains robust. According to JPMorgan Chase, Americans have ten to fifteen percent more in their bank accounts than they did before the pandemic.
With a number of successful consumer-facing companies already listing, the IPO market looks poised for a broader opening. Anticipation is building for some high profile listings including Birkenstock, the iconic sandal-wear maker riding high on the blockbuster movie hit Barbie. Its business, worth billions, is attracting Wall Street’s eye. Fast fashion giant Shein had its highest profit ever this year, fueling rumors of a potential listing.
Even China, despite a severe economic slowdown, and possible deflation, saw the world’s second largest IPO this month. Hua Hong Semiconductor listed on Shanghai’s Star Market at twice the price of its Hong Kong-listed shares.
Media
Hollywood studios continue to negotiate over a writers and actors strike that has upended streaming, movies, and traditional programs. One key sticking point remains how talent is compensated, especially with the opaque nature of viewing data and what constitutes a hit. Entertainment unions are concerned over this lack of transparency and the possibility that their members are not being adequately compensated.
Artificial intelligence is adding to the complexity of the new media landscape, according to Joe Flint of the Wall Street Journal. Issues include who controls an actor’s likeness and the possibility of AI replacing some actors altogether.
Against this backdrop, some streaming services continue to struggle with keeping viewers entertained. Nearly 2 million people dropped Warner Bros. Discovery’s streaming service. CEO David Zaslav predicted another year of operating losses. Disney is also losing subscribers. Both companies continue to struggle against streaming juggernaut Netflix.
Corporate Culture
Employees’ leverage over where and how they work appears to be weakening as the work-from-anywhere trend fades in the U.S. Despite increasing pressure, bare minimum Mondays and early off Fridays still dominate Gen Z work culture. Many are quitting when they don’t get what they want out of a workplace. They end up at companies with a culture more in line with their values.
In this environment managers are having a hard time, well, managing. The balancing act of personal and professional life that hybrid workers may enjoy more are perceived as an issue, including late afternoon “dead zones”. It’s unclear why the late day meeting request is still a thing.
Real Estate
Countervailing trends have been rocking the real estate market. Commercial properties, especially in the office sector, are still struggling with the changed work environment. Former alternate workplace wonderkid WeWork is warning of a possible bankruptcy. Its stock has plummeted to below $1 since March. Even former real estate havens like multi-family rental units are hitting hard times. Vacancies aren’t the problem. High interest rates are as mortgages skyrocket.
Soaring housing costs have locals fleeing hotspot Miami, which saw its first decline in population in decades. The luxury home market is also running into problems – no one wants to sell and buyers don’t want to buy premium properties with interest rates so high.
With such low inventory across the housing spectrum, and the high cost of existing homes potential homeowners are turning to new construction. Builders are incentivizing new purchases, including paying to lower a buyer’s interest rates and building more competitively priced homes. As home purchases pick up the odds of a recession recede even further from view.
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