A enterprise attempting to earn a living off mansions stuffed with TikTok influencers has gone public on the inventory market by way of an uncommon deal. It includes a former Chinese language well being care firm, and if that sounds complicated, nicely, we are able to clarify.
Social media entrepreneurs have rushed to seek out methods to earn a living from stars on fashionable platforms like TikTok. West of Hudson Group, for one, operates a community of content material homes the place many distinguished younger influencers reside.
Homes like these perform as administration firms, taking a share of income from the creators residing in them. The influencers typically don’t pay lease, however produce content material for manufacturers and promote merchandise as a type of in-kind lease.
Dozens of influencer homes have arrived within the Los Angeles space during the last 12 months, and the businesses that run them have been trying to find sustainable enterprise fashions. Going public, although, is a brand new technique.
West of Hudson was acquired this week by Tongji Healthcare Group, an entity in Las Vegas that was integrated by a Chinese language hospital in 2006 however had no property on the finish of 2019.
The deal was a reverse takeover, wherein a personal firm (on this case, West of Hudson) is acquired by an already-public one (Tongji Healthcare) however results in management. The deal closed on Wednesday.
There have been extra maneuvers behind the scenes. Earlier than the reverse merger, Tongji itself was acquired by the buyers who management West of Hudson, a New Jersey actual property operator named Amir Ben-Yohanan and his enterprise companions.
What all of it provides as much as is that the mixed firm, which has utilized to be renamed Clubhouse Media Group, is now listed on the so-called pink sheets market, the place tiny public and infrequently speculative firms commerce. On Friday, Tongji’s inventory closed at $2.30, 38 p.c under its August excessive.
Extraordinarily low priced shares — referred to as penny shares — are extraordinarily unstable. Whereas refined buyers could dismiss such a dangerous funding, inexperienced buyers, a lot of whom are energetic on on-line buying and selling platforms like Robinhood, have an urge for food for them, and for firms within the thick of social media tendencies.
Influencer content material homes typically revolve round drama. Many final only some months earlier than inner battle or a dispute between expertise and administration results in their disintegration. (In July, The New York Instances reported that a number of content material homes, together with those owned by West of Hudson, have been shopping around reality shows, using drama as a selling point. None have been sold.)
Clubhouse, the primary influencer house in West of Hudson’s network, was co-founded in March by Mr. Ben-Yohanan, Christian J. Young and Daisy Keech, a social media influencer. Its first location, in Beverly Hills, has expanded into a network of influencer mansions including Clubhouse Next, Clubhouse for the Boys, Clubhouse Malta and Not a Content House.
It could be laborious to draw buyers within the public markets, nonetheless.
Within the first six months of the 12 months, West of Hudson had income of almost $96,000 however a lack of $983,000. Mr. Ben-Yohanan, the corporate’s chief government who controls 62 p.c of the inventory, in keeping with a latest securities submitting, supplied it with a mortgage of simply over $1 million. The corporate can draw almost $four million extra from him, in keeping with the submitting, which additionally mentioned Tongji mentioned might have to boost cash within the markets to finance operations and develop.
In an interview, Mr. Younger mentioned the corporate was taking a look at choices for elevating capital in each the debt and fairness markets, however declined to offer extra particulars.
In line with the Tongji submitting, Mr. Ben-Yohanan based West of Hudson Properties, a New Jersey actual property firm that owns or manages over $300 million in multifamily properties. He’s listed because the tenant on two of the principle Clubhouse properties, in keeping with the submitting, which added: “Whereas Mr. Ben-Yohanan intends to assign these leases to the Firm sooner or later, there’s a risk that Mr. Ben-Yohanan could not assign these leases within the close to time period, or in any respect.”
A name to West of Hudson Properties looking for remark from Mr. Ben-Yohanan was not returned. Along with being chief government, he’s listed as Tongji’s principal monetary and accounting officer.
Financials apart, firms related to social media tendencies are proving engaging amongst new, younger buyers. Zach, a 12-year-old investor who has established a following on YouTube and Twitter, is one in every of many younger individuals who have gotten into inventory buying and selling, largely by watching YouTube movies. “There’s much more younger folks within the inventory market than folks suppose,” he mentioned.
He trades shares below his mother and father’ names (they monitor his utilization) utilizing a U.Ok. investing platform known as Buying and selling 212. He mentioned that he’d want to have a look at the corporate’s financials earlier than figuring out if it was a sound funding, however may see others his age being .
“For most children who put money into the inventory market, there’s curiosity in new sorts of social media tendencies and corporations like TikTok and desirous to put money into issues like that,” Zach mentioned. An organization that’s affiliated with high-profile social media stars, he mentioned, is “100 p.c one thing they’d be inquisitive about.”
Buying and selling in penny shares has surged this 12 months. After the Covid pandemic shuttered sports activities leagues earlier this 12 months, many pissed off sports bettors moved to the stock markets. The shift coincided with a widespread move — initially pioneered by trading app Robinhood — toward cutting trading fees, which further encouraged speculation in lower priced shares.
Such stocks, however, often have bleak business prospects and weak management teams. And with little professional trading activity or analysis, penny stock prices are volatile and driven by rumor and speculation in online message boards, with little concern for the fundamental likelihood of the business making money.
Through October, some 23 percent of shares traded in American stock markets were priced under $5, according to the New York Stock Exchange. In the same period in 2019, they accounted for around 14 percent of trades.