Is CorpHousing Group IPO a Good Buy?

Key Takeaways:

• CorpHousing Group plays into the return to normal through its short-term rental business geared toward business and vacation travelers.
• While economic challenges persist, evidence indicates that consumers are pivoting their discretionary funds to the travel sector.
• CorpHousing may be enticing, but prospective investors must conduct significant due diligence.

Following two years of lockdown measures and mitigation protocols, Americans are ready to travel, both for personal and professional reasons. Meeting this potential demand increase is CorpHousing Group, a company specializing in short-term rentals for businesspeople and vacation travelers.

Acquiring multiple rental units in the residential and lodging sectors, CorpHousing offers a potentially viable alternative to travelers who are looking for a cost-effective solution for stays longer than a night or two. With pandemic-related restrictions gradually fading, the company’s initial public offering (IPO) could be an idea worth investigating.

Below are the key pros and cons to consider.

What Does CorpHousing Group Do?

Specializing in short-term rentals located in major U.S. cities, CorpHousing Group provides an alternative to traditional lodging solutions. Mainly geared for people on business trips, the company also aims to fill the needs of vacationers. CorpHousing’s properties consist of individual, multi-family and hotel units.

According to the firm’s Form S-1 disclosure filed with the U.S. Securities and Exchange Commission (SEC), management’s goal is to “leverage technology to cost-effectively identify, acquire, furnish, manage and market these units to business and vacation travelers,” while providing its guests what it trademarks as “heroic service” under its consumer brands SoBeNY and LuxUrban.

Continuing with CorpHousing’s prospectus, “Our recent unit additions have primarily been entire room portfolios in hotels that were shuttered during the global COVID-19 pandemic. As we continue to grow, we anticipate that a large portion of our additional units will be acquired in the near term from hotels that recently ceased operations.”

In addition, management believes that “long-term leases for many hotel properties can be readily secured on favorable terms” and that it can “rapidly commercialize acquired units” via CorpHousing’s established operating infrastructure.

As an example of the above, the leadership team mentioned that in October 2021, the company “entered into a 15-year lease for the former The Blakely New York Hotel on West 55th Street in New York City,” thereby providing CorpHousing with an additional 118 rooms in its accommodation units offerings portfolio.

Executives mentioned that the “Blakely had halted operations as a result of the pandemic and was available to us at attractive terms.” Like predators eliminating weak or injured animals, CorpHousing essentially balances the business ecosystem by unlocking value from previously failed lodging enterprises.

When is the CorpHousing IPO Date?

Barring unusual circumstances, analysts expect CorpHousing to ink its name on the IPO calendar on Aug. 12, 2022. Shares will trade on the New York Stock Exchange under the ticker symbol CHG. The lead bookrunning manager for the new listing is Maxim Group LLC while Joseph Gunnar & Co. LLC will provide joint bookrunning management services.

In July, CorpHousing lowered the proposed range for its IPO, revealing plans to raise $20 million through the distribution of 4.5 million shares at an estimated pricing spectrum of $4 to $5 per share. In April of this year, CorpHousing filed to offer 2 million units at a range between $8 and $10. Each unit would have consisted of one share of common stock and one warrant exercisable at 105% of the IPO price.

CorpHousing’s IPO is scheduled to arrive at an interesting time. On the positive front, the phenomenon of revenge travel – essentially the byproduct stemming from people cooped up in their homes for approximately a two-year period – has pushed many people to take the long-delayed vacations they were planning before the COVID-19 crisis got in the way.

Moreover, the U.S. Bureau of Economic Analysis reported that the personal saving rate hit an all-time high on record back in April 2020. Combined with government stimulus checks and the work-from-home directive that organically allowed millions of white-collar workers to save on commuting costs, both the impetus and the capacity to travel is enormously high.

To be fair, economic pressures such as a blistering inflation rate dampen household spending and overall consumer sentiment. However, the bullwhip effect resulting from excessive inventory order requests against overly optimistic demand forecasting demonstrates that consumers are no longer interested in acquiring physical goods but rather actualizing experience-based services.

In other words, people are redirecting their available discretionary funds to vacations that the pandemic previously denied, thus boding well for CHG stock.

On the other hand, the latest data showed that the consumer price index surged to 9.1% in June. Further, the unexpectedly strong jobs report for July – while a positive – confirmed the Federal Reserve’s worst fear: wage growth leading to ever higher inflation. Therefore, the Fed has an even stronger incentive to aggressively pursue its hawkish monetary policy, which might not favor the growth-centric CHG stock.

What Analysts are Saying About CorpHousing IPO

Given the small footprint of CorpHousing’s IPO, very few analysts have weighed in on CHG stock. However, one of the biggest catalysts for the underlying lodging and associated services business is the return to the office.

While multiple sources report that most workers don’t want to return to the old way of doing things – indeed, surveys revealed that employees didn’t want to return to the rat race back in April of 2020 – many might not have a choice. With many technology startups cutting staff and even the stalwarts not ruling out distributing pink slips, any manner of insubordination would be extremely conspicuous.

As the ball appears to be rolling increasingly toward the direction of Corporate America’s court, management may eventually garner a majority consensus regarding returning to the office. Once there, demand for business travel should increase significantly, thus benefiting CHG stock.

However, the other side of CorpHousing’s IPO equation is that the company doesn’t appear to have a sterling reputation among its clients. While management loves mentioning its trademarked “heroic service,” online user reviews suggest a contrary tale.

To be clear, most anyone can post negative reviews on the internet, so such data should be taken with a grain of salt. However, the preponderance of poor feedback, ranging from a 1.3-star review on Trustpilot, a 2-star Yelp profile for CorpHousing Group in Miami, Florida, a 1-star Yelp profile in Miami under the SoBeNY brand and multiple complaints listed under the Better Business Bureau website suggests that the company may need extra work on the customer satisfaction department.

Not only that, CorpHousing’s marketing brochure for its IPO shows that between 2019 and 2021, refunds per rental unit jumped from $676 to $1,956. According to management, the spike in refunds was a consequence of the COVID-19 pandemic. However, the overwhelming poor online reviews for the business – either under CorpHousing or SoBeNY – suggests company-specific factors played into the broader consumer dissatisfaction.

CorpHousing Financial History

The measure of any business enterprise is found in its financials. Unfortunately for CorpHousing and CHG stock, the picture is a mixed one. For instance, net rental revenue (revenue minus refunds and allowances) in 2021 was $21.4 million, up 158% from the $8.3 million generated in 2020.

However, the latter comparison was during the worst of the COVID-19 outbreak. Therefore, it would be surprising if CorpHousing’s net sales in 2021 didn’t exceed the prior year’s result. Still, in both years, the company posted a net loss: $2.2 million in the red during 2021 and $4.6 million down in 2020.

Even more concerning is the company’s balance sheet. Per its IPO prospectus, CorpHousing has total assets measuring $3.8 million but total liabilities near $15 million. Thus, the stockholders’ deficit is $11.2 million, not the greatest statistic to carry heading into a public market launch.

CorpHousing Potential

Back in 2019, the American Management Association (AMA) revealed startling but not necessarily unsurprising news: people waste a lot of time at work while on the clock. However, an AMA survey quantified the productivity drain as an average of 2.09 hours per day wasted, not counting lunch.

Then, once the COVID-19 pandemic struck and most white-collar employees were telecommuting, suddenly, productivity increased – by double digits according to some reports. More than likely, employers are privy to the games worker bees are playing. It’s highly improbable that employees slacking off under supervision will then become productive without it.

This dynamic adds another possible catalyst to CHG stock in that employers have even greater justification to recall their workers. With the labor force gradually normalizing from COVID-19, business travel could blossom, leading to greater sales for CorpHousing.

Still, the financial profile for the company is problematic to say the least. Therefore, prospective investors will need to be very careful before engaging CHG stock.

Where to Buy CorpHousing IPO Stock

If you want to participate in CorpHousing’s IPO, you’ll need to know how to buy stocks. But before you take that step, you must sign up for a brokerage account. Below is a list of best brokers to consider.

CHG Restrictions for Retail Investors

Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Don’t engage if you have privileged information.

CHG Pre-IPO

Those seeking pre-IPO opportunities in CHG stock (acquiring shares at their initial offering price as opposed to whatever the open market decides) can do so through opening an account with ClickIPO.com.