Luxury Gym Company Equinox Might Merge with a Chamath Palihapitiya SPAC
Silicon Valley venture capitalist Chamath Palihapitiya has been among the most active and prolific investors for special purpose acquisition companies (SPACs), including the six that he has taken public through Social Capital Hedosophia as well as participating in various PIPEs (private investment in public equity).
Two of Social Capital Hedosophia’s SPACs are still searching for targets, Social Capital Hedosophia IV (NYSE: IPOD) and Social Capital Hedosophia VI (NYSE: IPOF). It seems like one of them may have found what it’s looking for.
A possible merger with Equinox
Bloomberg reported this week that Social Capital Hedosophia VI is in talks to merge with luxury gym company Equinox Holdings in a deal that could value the company at $7.5 billion or more. Social Capital Hedosophia VI is the largest of the six Social Capital Hedosophia SPACs, having raised $1.15 billion through its IPO last year. The rumored deal is expected to include a large PIPE component, according to the report.
Equinox runs a network of luxury gyms, as well as operating other brands including SoulCycle, Blink Fitness, Pure Yoga, and Precision Run. Like nearly all retail gyms in the United States, Equinox was hit hard by the COVID-19 pandemic and related shutdowns. The public health crisis forced many people to start exercising at home, benefitting connected fitness platforms like Peloton (NASDAQ: PTON).
Equinox generated $650 million in revenue in 2020 according to Bloomberg, which resulted in a net loss of $350 million. The company also operates a hotel.
SoulCycle has been at the center of several scandals
SoulCycle found itself at the center of controversy in 2019 when SoulCycle investor Stephen Ross reportedly hosted a luxurious fundraising event for former President Trump where tickets cost as much as $250,000, which upset much of SoulCycle’s client base during a time of heightened political tensions.
There was a more recent scandal in late 2020 following reports of a toxic culture where some SoulCycle instructors allegedly had sexual relationships with clients, used racist or homophobic language, and engaged in other inappropriate behavior. The company reportedly overlooked unethical activity from top instructors that brought in significant revenue.
The news comes as the pandemic has started to subside in the United States thanks to vaccine distribution. While many local gyms went bankrupt due to the crisis, it’s unclear whether people will return to retail gyms en masse or if the exercise-at-home trend will persist now that consumers have enjoyed the greater convenience.
Additionally, many consumers may have already purchased new equipment to work out at home and want to get value out of those purchases, particularly as many products (like those offered by Peloton) require monthly subscriptions.
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