What's New In SoulCycle's Amended S-1 IPO Filing And Why You Should Care

Dec. 11, 2015 7:30 AM ETSoulCycle (SOULC)
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  • SLCY shown strong growth since initial July 30 S-1 IPO filing.
  • 20%+ growth in TTM revenue ($151M) & EBITDA ($48M) since initial IPO filing 5 months ago.
  • Nearly all amendment updates are positive and supportive of strong IPO valuation.
  • SoulCycle IPO will test public market ability to "get" the power of branded studio fitness.
  • Opportunistic investment opportunity could exist if IPO stumbles out the gate given long-term upside.

SoulCycle, the rapidly growing indoor-cycling lifestyle brand that strives to empower its cycle riders in an immersive fitness experience, filed its original S-1 for an initial public offering on July 30, 2015 and today, a little less than 5 months later, it has filed an updated amended S-1 in preparation to see if the public markets will stay open and have appetite for its unique, highly profitable business model. Watch the IPO performance, given a stumble for any number of external drivers could present an opportunistic buying opportunity.

SoulCycle's original filing revealed its highly-compelling business economics: each cycling studio generates on average $4M in revenue and over $2M in studio EBITDA contribution--a 55% margin unheard of in retail today. Those unit metrics are coupled with a tremendous runway: only 48 studios are open today with 250+ total studio opportunity domestically.

Additionally, SoulCycle is supported by macro industry trends including consumers' growing adoption of niche studio training, consumer preference and efficacy of group-based workouts, and the power of community-driven brand engagement.

The IPO window slowed after SoulCycle's original filing at the end of July, but the Company is now staged again, and, given its owners stand to make outsized profits at essentially any IPO price, likelihood of getting out is higher, with less dependence on stellar market conditions: Related Companies / Equinox acquired a 75% stake in May 2011 from SoulCycles two founders for an estimated $15M - $25M, and subsequently in May 2015 took on $180M in debt to make two $90M payments to each founder for essentially the remainder of their minority stakes. While this debt-funded repurchase suggests an enterprise value of $720M, no additional equity was required by Related Companies / Equinox to acquire this stake, so their all-in equity investment basis to now own +95% of SoulCycle is likely near or below $50M. Essentially whatever the trailing EBITDA multiple

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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