Discover more from The 21 Hats Morning Report
The Office Party Is Still On
They’ve long been awkward affairs, but companies are trying even harder this year.
Today’s highlights: The recovery continues to stall, the stimulus talks break down again, and a correction on our PPP tax surprise explanation.
The first-day rallies of Airbnb and DoorDash are sparking renewed debate about IPO pricing: “Airbnb opened 115 percent above its initial public offering price, the biggest debut rally on record for a large U.S. listing. Had the shares priced closer to where they started trading -- at $146 instead of $68 apiece -- Airbnb could have raised $4 billion more for the company and early investors. That gap is known as money left on the table, and is at the center of a years-long debate about how to price an IPO. Getting pricing right on an IPO can be complicated. While a big rally can leave investors wondering why shares weren’t priced higher, if the stock doesn’t pop -- or worse if it falls -- companies can be viewed as failures for not attracting investors.”
“Of the top 10 U.S. trading debuts on record for companies that raised more than $1 billion, five were logged by businesses that went public this year, according to data compiled by Bloomberg.” READ MORE
THE 21 HATS CONVERSATION
First, a correction: I’ve been writing here all week that if you get your PPP loan forgiven, it becomes taxable income. That was wrong, and I apologize for adding to the confusion of an already-complex issue. There is in fact a PPP loan tax surprise, but that’s not it. The surprise is that, contrary to Congress’s original intent, the IRS has ruled that once the loan is forgiven you cannot deduct the expenses that you used the loan to pay off. And that means you are likely to be on the hook to pay taxes on an amount equal to the forgiven loan.
I’m going to quit here while I think I’m ahead. If you haven’t already done so, watch the video below of my conversation with two people who do know what they’re talking about: Lou Mosca, chief operating officer of American Management Services, and Chris McKee, managing partner of Venturity Financial Partners. They explain my mistake and everything else with remarkable clarity, including how much tax liability you are likely to face and what you can do about it. (If you still have questions after watching the video, reply to this email and I’ll try to get them answered for you.)
Amazon plans to train 29 million people to work in the cloud: “The online giant committed $700 million last year to reskilling 100,000 of its own workers in the U.S. The new effort will build on existing programs and include new ones in partnership with nonprofits, schools and others. Amazon’s latest initiative is geared toward those who aren’t already employed at the company. The idea, it says, is to equip people with the education needed to work in cloud-computing at a number of employers seeking to fill high-tech positions. While some participants might find jobs at Amazon, it is more likely they would get hired at other companies, including many that use Amazon Web Services, the online retailer’s cloud division.”
“The free training could support those looking to prepare for entry-level support positions or in helping existing engineers broaden their expertise in areas like machine learning or cybersecurity, the company says.” READ MORE
Yes, the office holiday party is still on: “Long before the coronavirus, office holiday parties were often awkward affairs. Now, with the holidays fast approaching, office administrators and other boosters of workplace bonhomie are racking their brains for ways to remotely celebrate the season, trying to dust off their virtual playbooks in lieu of the traditional tinsel, potlucks and office Christmas trees. It isn’t an easy task.”
“In Georgia, marketing company 3MP Atlanta convened last week with around 600 of its sales representatives and managers in a virtual ski lodge, which was outfitted with a fireplace, a Christmas tree and tables.”
“Attendees could click on different tables to move around and video chat with colleagues, part of an effort to mimic the feel of a real party, says Ed Cunliffe, 3MP Atlanta managing partner, who hosted the event.”
“He introduced the online ugly Christmas sweater competition, complete with a $500 cash prize.” READ MORE
Atlanta is becoming the influencer capital of America: “Atlanta is where 15-year-old Jalaiah Harmon created the Renegade, a dance that took over TikTok in late 2019 and remains one of the app’s best-known viral trends. It’s where Lil Nas X turned ‘Old Town Road’ into not just a hit single but the biggest thing on the internet. It’s where YouTube stars with followings in the multimillions record their videos and where some of TikTok’s biggest viral videos and trending challenges began at a casual weekly meet-up called TikTok Thursdays.”
“Atlanta’s creators are predominantly Black. In Los Angeles, on the other hand, most influencer collectives have no or very few Black creators. And despite creating and driving many of the internet’s biggest trends, Black creators receive fewer brand deals and are consistently paid less than their white peers.”
“But Atlanta’s new generation of entertainers is hoping to change that. In the last three weeks, two all-Black Gen Z creator mansions, the Collab Crib and the Valid Crib, opened in the city about 30 miles apart.”
“Their members want to cement Atlanta as a hub for online talent and are hoping these homes will bring a level of legitimacy to their status within the larger creator ecosystem.” READ MORE
THE COVID ECONOMY
The recovery is stalling: “The number of workers seeking unemployment benefits, a proxy for layoffs, climbed sharply by 137,000 to 853,000 last week, the Labor Department reported. The level of applications was the highest since September, but still well down from a peak of nearly seven million in late March. The number of applications for a separate federal pandemic program also rose sharply last week.”
“Economists surveyed by The Wall Street Journal this month cut their projections for economic growth and job creation in the first quarter of 2021, but they expect the expansion to accelerate later in the year after coronavirus vaccines are more widely available.” READ MORE
The stimulus talks are in trouble again: “Efforts to reach a year-end agreement on a stimulus package to prop up the shuddering economy faltered on Thursday as aides to Senator Mitch McConnell, the majority leader, signaled privately that most Republicans were unlikely to endorse an emerging bipartisan compromise without changes. In discussions with other congressional leaders, Mr. McConnell’s advisers expressed concern that Republicans could not accept liability protections for businesses that they consider too limited or funding for state and local governments that they have long resisted. Both are central elements of a $908 billion outline drafted by moderates in both parties.” READ MORE
COMMERCIAL REAL ESTATE
Should midtown Manhattan offices become apartments: “The pandemic is pummeling New York City’s commercial real estate industry, one of its main economic engines, threatening the future of the nation’s largest business districts as well as the city’s finances. The damage caused by the emptying of office towers and the permanent closure of many stores is far more significant than many experts had predicted early in the crisis. The powerful real estate industry is so concerned that the shifts in workplace culture caused by the outbreak will become long-lasting that it is promoting a striking proposal: to turn more than one million square feet of Manhattan office space into housing.”
“Nearly 14 percent of office space in Midtown Manhattan is vacant, the highest rate since 2009.”
“On Madison Avenue in Midtown, one of the most affluent retail stretches in the country, more than a third of all storefronts are empty, double the rate from five years ago.”
“Another possible source for expanding housing would be to convert hotels, many of which have closed as the industry has been decimated by a plunge in tourism and business travel.” READ MORE
THE 21 HATS PODCAST
Episode 42: The Great Covid Churn: This week, Paul Downs, William Vanderbloemen, and Laura Zander talk about William’s prediction that 2021 will be a year of employee turnover. His theory, which he says he’s already seeing in practice, is that pent-up forces that were blocked by the pandemic this year will be unleashed in 2021—especially as vaccines arrive and the economy improves. His advice: Make sure your best people feel appreciated. Or, as he puts it: “Better to keep a good employee —even if it costs you more than you think it should—than to have to call me.” Plus: we discuss whether, when the time comes, businesses should require employees to get vaccinated.
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