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Airbnb asks the SEC to allow them to give their hosts equity in the company in anticipation of their 2019 IPO. The Hustle Sponsored by Airbnb wants to rewrite the rules of the gig economy by giving their hosts equity...
By: Wes Schlagenhauf
September 24, 2018
Airbnb asks the SEC to allow them to give their hosts equity in the company in anticipation of their 2019 IPO.
Airbnb wants to rewrite the rules of the gig economy by giving their hosts equity
Airbnb has petitioned the SEC to allow them to give hosts company equity (read the letter here). Why can’t they just go for broke and flip the gig game on its head? Well, turns out there’s some red tape involved.
Currently, law prohibits gig economy companies from giving contractors equity. But, if Airbnb succeeds, gig economy platforms could win even more leverage over contractors.
So, what are the rules?
Rule 701 of the Securities Act allows private companies to award equity only to employees and investors. Airbnb wants to expand eligibility to give hosts -- who are contractors, not employees -- equity.
Airbnb argues it would be a win-win, giving hosts valuable stake in the $31B company and giving the company a bookings boost.
But, don’t mistake this maneuver for charity
Companies like Airbnb and Uber have been careful not to classify their contractors as employees to avoid paying expensive benefits like overtime, minimum wage protection, and health insurance.
Since this particular perk would conveniently help boost sales before a planned 2019 IPO, Airbnb now wants to treat contractors like employees. And, while equity may seem like a win for contractors, and would garner more company loyalty from non-employees, basic benefits would likely be far more valuable.
Big Gig vs. the world
Airbnb’s not alone in its quest: Uber met with the SEC numerous times last year to secure equity for its drivers. And, if one big company scores a contractor victory with the the SEC, it will open the floodgates for the rest of the gig economy.
But even if Big Gig wins over the SEC, it still will have to pass the new law with the federal government (and the feds would have to rewrite tax law for all the new equity-holders) -- meaning, even if it does move forward, it’s gonna take a long time to get rolling.
Going to Airbnbattle
Farout: Luxury marketplace Farfetch’s shares surge 53% in its first day as a public company
Shares of London-based luxury marketplace Farfetch skyrocketed more than 53% in their market christening Friday -- selling 44.2m shares by Thursday night (at $27 a pop).
All in all, the impressive debut branded a roughly $6.2B valuation on Farfetch’s fashion-forward behind.
Investors love a good niche market
And when that niche is luxury? Fuggetaboutit.
Farfetch got its start in 2008 helping local high-end boutiques reach wider audiences (without dealing with Amazon) and evolved into a direct-to-consumer tool for bougie brands like Gucci.
Now, it helps high-end shoppers get their hands on items (like a reported $8.2k leopard-print coat) from 700 brands and boutiques internationally, and express ships to more than 190 countries.
For being niche, Farfetch has a lot of competition
According to CNBC, “marketplace” companies often trade at a higher premium than traditional retailers, because they don’t come with the “risk of being stuck with unwanted product” -- AKA, no inventory.
However, the global market for personal luxury goods is expected to reach $446B by 2025, and Farfetch already faces competition from high-end retailers like Matchesfashion.com and Net-a-Porter.
Farfetch’s edge? Exclusive contracts with over 98% of its retailers.
Though they’ve yet to reach profitability, the firm’s growth continues to track positively. Farfetch reported roughly 1.1m active consumers as of June, and brought in around $385m in fiscal 2017 -- a 59% jump YoY.
Everyone can finally relax: Comcast beats out Fox to acquire Sky
The months-long battle for Sky nears a close as Comcast officially topped 21st Century Fox in a weekend auction for the British broadcaster with a $38B bid.
While this is a mere consolation prize after the media giant lost big to Disney in the battle for 21st Century Fox in July, Comcast execs say acquiring Sky -- Europe’s biggest pay-TV company -- will reduce Comcast’s reliance on its mature US market.
Netflix on the brain
Some analysts believe Comcast’s gargantuan bid is driven by the desperate need for legacy companies to build scale to defend against the looming threat of streaming services like Netflix.
And they’re not wrong: Sky gives Comcast some footing in online video streaming with its Now TV business, which has close to 2m customers across the globe -- an absolute necessity to compete with Netflix.
Reinforcing the walls before winter hits
The acquisition of Sky’s wide product range of media production, phone, TV, and internet services will automatically add 23m European customers to Comcast’s list.
It also lifts Comcast’s non-US revenue to about 20% (up from 9% in 2017) and makes them the world’s largest pay-TV operator with 52m subscribers -- and that’s nothing to shake your Apple TV remote at.
The podcast biz in China is 23x more valuable than in the US thanks to paid subscriptions
The podcast industry in China is on track to exceed last year’s mark of $7.3B thanks to growth in popular educational podcasts. The US podcast market, by comparison, is only worth about $314m annually.
China’s podcasting industry is 23x larger than America’s for one primary reason: Podcasts in China are predominantly paid subscriptions, while podcasts in America are almost all free and ad supported.
The ‘pay for knowledge’ economy
While American producers position their podcasts as entertainment, many Chinese podcasters sell their podcasts as self-improvement tools. Since American podcasters can only make money once they’ve amassed a huge audience, the industry has grown slowly.
But, even by charging as little as $3 for subscriptions, many amateur Chinese podcasters with audiences as low as 7k still generate significant revenue by selling directly to listeners.
Individual podcasters in China can make $8m a year with 250k listeners. Serial, America’s most popular podcast ever, made about $500k in its first year -- after 19m downloads.
You probably should quit your day job
Because the industry is geared toward education and not entertainment, the stars of the pod in China aren’t comedians or celebrities -- they’re professors and consultants.
Professionals who offer their expertise in podcast form make good money -- enough to encourage at least one professor to quit his day job at Peking University after making $8m off his economics podcast.
And, it’s not just econ professors having all the fun: More than 218k Chinese consumers paid for a podcast called “How to Make Your Voice More Attractive.”
There’s even a special name for that sort of couch-bound cashflow: “passive income.” And the time-tested, billionaire-approved way to generate passive income? Investing in commercial real estate.
*Inserts monocle, lights vintage pipe*
Commercial real estate investments can create potentially reliable income streams thanks to expected rental payments from tenants or interest paid on loans. If you own shares of a real estate investment fund, those payments could come back to you in the form of dividends -- like income.
Sound complicated? It’s not, especially with Fundrise.
With their online platform, it’s so simple to invest in commercial real estate you can literally do it from your couch.
Fundrise gives everyone access to premium real estate investments. Just set up your account, choose the portfolio that’s right for you, and fund it -- then sit back and watch the potential dividends stack.
Gain access to the types of portfolios wealthy investors drool over. Open an account with Fundrise today for as little as $500.
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monday morning review
Feedback makes the heart grow fonder
And we already love each and every one of you. Here are our favorite reader notes from the past month:
“A week in review section would be neat” -- Margaret
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*Prays harder to office shrine of 90s Maxim magazine clippings*
Just kidding, Brandon. We don’t have one of those.
-- LQ, Managing Editor of The Hustle & Chief Shrine Supervisor
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It’s Been A Long Time, Lady Wray. Jackson 5 vibes from Nicole Wray, who’s been holding it down since the ’90s with Mos Def, Missy Elliott, The Black Keys and more.