Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or DECEMBER 2020 infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new Leaving It All Behind… To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. LionTree CEO, Aryeh B. Bourko, shares 2020 reflections in his year-end letter. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

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issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax.

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

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issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax.

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

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issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax.

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

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issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax.

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

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issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax.

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

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by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax.

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

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by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax.

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

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by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax.

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

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by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax.

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

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by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax.

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax. 11

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax. 12

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax. 13

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax. 14

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax. 15

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax.

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s

16 Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax.

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s

17 Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax.

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s

18 Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax.

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s

19 Not every year will be 2020, but the lessons of 2020 should make us better every year of 2008 helped create the ripe ecosystem for Google, Uber, and Airbnb. Constraint calls forth theory is that commission-free trading has become a form of entertainment for some and a going forward. creativity. Scarcity is the new abundance. In this + universe, new geographies require fresh centers of gravity. We need to build replacement for live sports gambling for others during the pandemic. Whether amateur or infrastructure flexible enough to shift to the “plus.” That starts with ourselves. But it will professional investor, bears are nowhere to be found, as the median S&P 500 stock had These lessons clarified for me back in November, when for the first time in months, I looked out As this year unfolded, and during our weekly all hands video conference in the heart of the include networks reimagined, e-commerce reinvented, whole industries renovated and paths to outstanding short interest accounting for just 1.6% of market capitalization, the lowest level an airplane window and saw sun, sand and a sparkling metropolis built by strategic investments pandemic, I told my team - leave it all behind. Let us take not only what we can carry, but public markets rebuilt. I passionately believe in New York City+ and am loyal to its recovery and since at least 2004, based on October data compiled by Goldman Sachs. in the future. I was landing in the United Arab Emirates, a relatively new country putting aside what will carry us. If we focus on the essential, we will make ourselves essential. As we set future. We are staying put and investing in that reality. At the same time, as we have seen from old antipathies with a confident vision. Peace and profits have a way of unlocking politics and o for parts unknown, the indispensable things that we need to take with us are curiosity about adaptive companies such as Palantir who recently announcement moving their headquarters to Inflation and currency devaluation are two longer-term risks I am attuned to as well, which paradoxes, tilting possibility on its axis. I stopped by the beautiful new Louvre Abu Dhabi, a the world coming into being and trust in the people and communities that we travel alongside. Denver, no locale has a monopoly on creativity and connectivity. In a world where many people could result from continued aggressive monetary policy from the U.S. and other nations. In 30-year joint venture with France and saw their motto “see humanity in a new light” as We keep each other safe so that we can soar. can work from anywhere, there will be many new ‘somewheres,’ from mid-size American cities addition, the ways in which technology continues to transform the economy will result in better especially resonant. Masks on, eyes open, we are all adjusting our vision to this new light. to new global hubs in the Far East. Perhaps it’s the time for multiple “passports” operating outcomes for some industries than others - e ciency and productivity have created both new To find a center, we need to journey to the farthest points. To build a network, we need to comfortably in a range of jurisdictions. wealth and fresh problems of unemployment and income inequality, dynamics which are sure to Even with the vaccine promising a fresh start, packing the habits and best practices we want to familiarize ourselves with its furthest points, where dissent lives and where the action is. define and complicate the future of work. carry and leaving behind those we don’t will take real wisdom. It's not sustainable to live in a And to develop a culture, we must be at home at the “edge”: the ideas, trends, and perspectives We need to pursue life with the liberated energy of people who are ready to chase excellence state of crisis, a moment of societal upheaval or political unrest, or within markets where the that cut against the Establishment today and innovate their claim to be the Establishment of the with gusto. If we have been quarantined, we have also been unlocked and freed for the future. As we look ahead to the future, I would suggest that the framework of global cooperation are established players in each industry are locked. Moving forward in 2021 requires not only future. As the horizon moves, we must move with it and bring along as many people as we can. This is true on a personal level, on a business one, and for our society at large. Potential needs vastly strengthened on a structural level. Recent deals have been occurring at a seemingly knowing but internalizing the truth that digitization is the whirlwind that will remake The Latin phrase audi alteram partem, “listen to the other side,” means to hear voices dierent to be pursued, and if the path is not the right one, chart a new one. Every year is a mirror frenetic pace from the China Trade Deal (R.C.E.P.) to the United States-Mexico-Canada everything. From politics to financial systems, from live events and sports, to wellness and the from your own. To create transformation we will need to hear both the blue-collar workers and for what came before and a window for what’s next. As I wrote the last couple of years in this Agreement or USMCA (“NAFTA 2.0”), with trade deals between the UK and EU in the works. way we work, to food supply chains and education. Collective eort, built from a range of the billionaires, the markets and the small businesses, the coasts and the Sunbelt and Midwest letter, scale players remain in motion, and we certainly remain a work in progress. But my eyes We are also seeing historic regional peace deals, most notably, the Abraham Accords in the I. Introduction perspectives, from Wall Street to Main Street, from CEOs to protestors, will propel us into the constituents, of every race, color and gender. We are living during a time of change, but and heart and mind are firmly facing forward. Last December we thought we were headed into a Middle East/Gulf and Serbia and Kosovo’s economic normalization pact. As we enter a period future. change also takes time. new decade of opportunity, now let us take a deep breath and jump into the true start of a next of political normalization and global recovery, I think it is prudent to look not just at the West As I sit in my home o ce putting the final touches on this letter, a 52-year-old critical care decade. but also Eastward (Middle East, Africa, and Asia) for investment opportunities. nurse in nearby Queens, New York received the very first COVID-19 vaccine in the United Beyond these binaries, we all need to rediscover the grey area, the challenging terrain where we The exodus from oces and public spaces to homes means that mass media is giving way States. This year was marked with unimaginable loss on a global scale and while virus cases and grow together. It means leaving behind the restrictions that limit us and the divisions that to “me-dia''. Each person is their own channel, with Zooming options beamed in the image of III. Market Outlook A. THE “BULL RECESSION” OF 2020 deaths are increasing at an alarming rate, a sense of optimism emerges as we start to turn the erupted this summer in ways that show our country is still fractured and that shamefully we still their preferences. Scale is no longer a virtue for its own sake, and companies that cannot make corner. Nothing will be as it once was and I hold my people and communities tighter than I did harbor biases that stain the fabric of our society. their footprint feel intimate and bespoke will fail to gain traction. I started my letter last year My fundamental thesis on the near-term capital markets is that we will enter 2021 with a At this time last year, the consensus outlook was that the U.S. was heading for a market before. A remarkable thing happened during this stretch of physical isolation and seeming with the mantra plus ultra, or “something beyond.” This year, we lived it. In a world of robust, almost unprecedented, market environment, buoyed by three primary catalysts: (1) slowdown and potentially a recession in 2020. Instead, this year, we have experienced a “bull stasis: connectivity grew, the pace of change accelerated, and our sense of possibility II. A Period of Realignment is Underway pandemic, the plus has become necessary. Media companies have been branding their continued positive impact of fiscal and monetary stimulus, (2) COVID-19 vaccine, which recession”- a continuation of last year’s bull run in the stock market, with the backdrop of a rejuvenated. streaming video services with a plus-sign at the end of their names (“+”), to signify to the should facilitate economic recovery, lower unemployment levels, and allow business and job powerful, even if short term economic recession. The image of our moment is not black and This year has reminded us that even though much is out of our control, we remain the consumer that they are getting something new, with more value ( Disney+, Hulu+, ESPN+, creation to rebound, and (3) SPAC impact on company capital raising strategies, which is white, but painted in complicated shades of grey. At these rare moments of transformation, we must realize that there is no going back to artists tasked with creating the image of our future. What is required is perspective, Apple TV+, Paramount+, BET+, Discovery+). Every company needs to be working towards the bringing more companies public and providing investors with more diversified investment normal: we must set a course to go forward to the extraordinary, to a perspective where imagination, and proper execution. It is not the first time these have been in demand. There + version of itself, all the time. opportunities. U.S. GDP is forecast to decline (-3.7%) in 2020, the worst since 1946 (-11%) when government growth and achievement are possible, recovery is top of the agenda for all, and innovation is not was an engraving of a sun on the back of George Washington’s chair at the U.S. Constitutional spending dropped significantly as the country pivoted from a wartime economy built around just a slogan but a practice. Here at LionTree, on March 12, we moved our entire global team to Convention in 1787. The delegates whispered among themselves about whether the sun was We are building LionTree+ in everything we do. Going forward to extraordinary means More specifically on the first two points, an accommodative Federal Reserve policy (i.e., low manufacturing supplies for the World War II eort to a peacetime economy focused on creating working remotely, created new internal communities to ensure both information flow and rising or setting, and what it augured for the risky rebellion that would eventually turn into the embracing the “+” part of the equation. What is the next version of ourselves, unmoored from interest rates), the promise of further government stimulus and a vaccine suggest positive civilian jobs. The unemployment rate as of November 2020 is 6.7%, down from the all-time health were paramount, and hosted weekly client town halls to share best practices, insights and country that will inaugurate its 46th President next month. o ces and the morning commute and the assumptions that held us back? With the help of momentum in the first half of next year. These are global trend lines. There is a real bull case for high of 14.7% in April 2020 but still about two-times what it was in February 2020. keep in check both our sanities and our drive. These are the people and experiences that I will technology from companies like Zoom, Microsoft and ServiceNow, we reinvented what it the U.S. economy in 1H 2021, with favorable comparisons to this year. I would also expect to take with me into this new year. The wisest of them all, Benjamin Franklin, was also conflicted. meant to work, constructing a plan to stay safe, imaginative, and alive to the opportunities ahead see the beginnings of a comeback for those industries who have been especially hard hit by Yet, extraordinary fiscal and monetary interventions have propelled asset prices to new all-time But in an instant, he saw the truth: the sun was rising. It was a of us. We realigned our space and reconfigured our mindset to advise, invest, and partner pandemic-driven lockdowns such as live events, travel and outdoor advertising. Companies like highs. In fact, due to these massive government actions, we experienced the shortest bear In last year’s letter, I introduced the concept of “scale players in motion.” We could not have matter of perspective - a distinction that made all the against a backdrop nobody has ever seen before. In the coming pages, you will see how Expedia, Live Nation and Ocean Outdoor should bounce back and join those that have already market ever – just 33 days compared to 302 days on average since the 1920s (of course, the imagined how important and how quickly “motion” became imperative for survival in 2020. dierence. The shortsighted saw a dimming British Empire. LionTree’s merchant banking strategies are interwoven with the industry players, thematics and found their footing. I am bullish on industries that bring people together and benefit from public second shortest was in 1929). In addition, job growth is likely to continue to be hampered by Incumbents needed to become more nimble in response to the pressures placed on traditional The farsighted perceived a brightening future. The optimists market participants which govern our daily actions. We grow in tandem with the dreamers and gatherings - I firmly believe we will not leave behind our sense of belonging and community as both the lingering and lengthening eects of the pandemic and structural transformations to the business models by tech platforms and startups. The pandemic called for rapid forward motion. were right. Breaking with the past and betting on the future doers who form our expanding and deepening community. we migrate through the new year. American economy, engendered by technological transformation, disruptive e ciencies, and Pivoting business models, once a hallmark of startup culture, became a necessity. Companies made a new world. digitization. These changes both oer new opportunities and take a real human toll. They were forced to leave behind the old ways that worked in the past. To highlight in bright brushstrokes just a few accomplishments from this past year: we were so That being said, the trajectory of the global recovery might be somewhat choppy after the initial increase the urgency of finding ways to grow the pie for everyone. But let’s leave history to the historians. We are living at a moment of opportunity for proud to participate in deals like ViacomCBS’s sale of Simon & Schuster to Penguin Random bump and looking into the back half of 2021 and beyond. U.S. markets, while robust and Companies were not the only ones forced to make these adjustments. We all had to decide what re-founding of our society - a realignment only we can set in motion: economically, House LLC, Liberty Global and Telefonica’s £31 billion UK merger of Virgin Media and O2UK, optimistic heading into 2021, are already trading at record valuation multiples, implying that B. CREDIT MARKETS habits and perspectives we brought with us, and what we left behind. There is a new dawn socially and with our most precious asset, our health. The surest foundations are set amid the New York Times’s acquisition of Serial; SiriusXM’s purchase of Stitcher from E.W. Scripps, some of this optimism is already priced in. Retail investors undoubtedly have been a driving the sale of eBay’s Classifieds business to Adevinta, and Univision Communications’ sale of a happening now that features the transformation of industries, environmental and societal fixes chaos and the most enduring masterpieces emerge from the mess of disruption. Many of the force here, boosting the “hot” momentum stocks - they now account for roughly 20% of stock The Federal Reserve’s bond-buying initiatives also helped resuscitate credit markets in the majority stake to investors including ForgeLight, Searchlight and Televisa who see the value in in motion, diversification of growth, and economic rebound ripe with opportunity. This year most influential companies were formed out of our darkest periods - General Motors, Disney, market activity, on average, up from just 10% in 2019, according to Citadel Securities, and wake of the COVID-19 pandemic, and the investor appetite for riskier debt tranches has been Spanish Language communities and content. was filled with “black swan” moments, from which we need to learn from, not be paralyzed by. Walmart and Microsoft, just to name a few. The Dot-com bubble, 9/11 and the Financial Crisis Transactions create transformations. JPMorgan estimates that U.S. retail brokerages now hold nearly $6 trillion in assets. One remarkable. US high-yield debt issuance reached nearly $350 billion for 2020 through October

issuances again. In the 30 days following the Warner Music IPO, 30 traditional IPOs were While some have called the recent explosion in SPACs a fad, they are an innovative and E. M&A OUTLOOK: THE FUTURE COMING INTO SHAPE decade in transition, but now - with networks reimagined, media renovated and technology priced vs just 26 in the first 5 months of 2020 combined. Investor demand for some of the attractive method for companies to go public, with less risk on valuation and more flexibility for permeating everything, they can optimistically look to 2021 as a year of moving beyond and higher-profile deals has been massive this year, with Airbnb, Lemonade, Snowflake, and management teams to negotiate deal terms. In choosing a SPAC, we encourage companies to On the M&A front, we expect to see a strong renewal of deal activity over the second half of moving forward, to a better version of themselves, open to reinvention and reacceleration. BigCommerce all trading up over 100% on the first day of trading. In fact, historical data consider size (amount of dilution they are willing to accept), the flexibility and value-add of the 2020 to continue into the new year. The market’s underlying M&A fundamental story, compiled by University of Florida Professor Jay Ritter shows Airbnb was the 19th company in Sponsor, and of course the Sponsor’s track record with prior transactions. surprisingly, has never been more robust than it is today, even in the midst of a pandemic. The tone-setting move heading recently was Warner Bros’ bold announcement that it will 2020 to double in its first day of trading, which marked the most since the Dot Com Bubble of Several factors are contributing to the vibrant deal environment: (i) historically low borrowing release its full slate of films in 2021 on both its streaming platform and theaters simultaneously. 1999 & 2000 when 117 & 77 companies, respectively, at least doubled in their first day of Regardless of your view, SPACs will have an outsized impact on the public markets next year costs, (ii) meaningful cash capacity by private and public acquirers alike, (iii) the return to risk It telegraphs just how thoroughly content and delivery are merging, and how AT&T is “all in” trading. and perhaps beyond. There are now approximately 200 SPACs in the market looking for targets taking in the pursuit of growth and diversification, (iv) portfolio optimization by scaled players with HBO Max. to take public, according to SPACInsider (as of Dec.14, 2020), whereas only 4 of the past 10 and (iv) the increasing divergence between the haves and have-nots between Naturally, this has led to a growing concern among issuers that companies are not raising capital years featured more than 198 traditional IPOs (including 2020). This could drive a significant “COVID-19-proof” businesses and all others. The desire to drive growth and capture financial This breakthrough highlights the opportunities for (re)invention as we move into 2021 as well e ciently through the traditional IPO. As a recent example, gaming platform Roblox “paused” increase in the number of new public companies and has already ushered in a wave of and strategic synergies are further enhanced by the improving economic and public health as the power of marrying distribution with proprietary content. It also poses many challenges its IPO until next year for various reasons including concerns management concerns about the companies – or entities – who have gone public at an earlier stage in their lifecycle than they backdrop. We have seen various examples of each of the aforementioned strategies in 2020 and by creating disruptions and opportunities for content creators, theatrical distributors but also e cient pricing dynamics. This reflects the massive delta right now between what large might have otherwise. expect that to continue. Some select recent transactions include: highlighting the need for IP even for the most scaled of streaming platforms. By disrupting a institutional investors and retail investors will pay for growth, and how issuers must balance media model built on windowing, it has pulled forward and concentrated the economics that early investor and employee shareholder concerns as well (who, if selling at IPO, would view a At LionTree, we have been at the forefront of this trend, having been fortunate to act as financial • Portfolio Optimization: ViacomCBS’s sale of Simon & Schuster to Bertelsmann; used to be distributed amongst many players in the ecosystem. large IPO “pop” as leaving money on the table). No company wants to miss out on the entire advisor to Virgin Galactic, Skillz, and hims & hers, on their transactions, and to serve as eBay’s sale of its digital classified business to Adevinta; IBM’s spin-o of its IT services 7, marking a new annual record, according to S&P 500 Global Market Intelligence data. IPO “pop”, but this example highlights how, in this bullish IPO market, management teams and underwriter to the Ajax I SPAC’s $750 million IPO. We also served as co-manager for several unit; Telia divesting its 47% stake in Turkcell Holdings; AT&T’s rumored sale of Looking ahead, where will the long-tail of content come from? Perhaps from the “edge” Borrowing costs are notably low, as the average new issue yield for unsecured debt was 4.97% in sponsors are challenged to find the right valuation harmony and mix of long-term oriented traditional IPOs this year, including GoodRx, Rackspace Technology, Lemonade, and Warner DIRECTV communities and new media models will have to be created. The next chapter will be written by November, setting a new all-time low. Ball Corporation’s oering in August set a record for the investors. It could also spell the end of the 180-day lockup requirement for employee Music Group, helping issuers raise a collective $4 billion and build a solid foundation of those who can take the best of their strategies and values and execute against them on a canvas lowest-ever borrowing costs for a BB+ or below credit, raising $1.3 billion 10-year bonds with a shareholders, putting them on equal terms with new investors at IPO, who are free to buy and long-term oriented shareholders. • Business Diversification and Drive for Complimentary Growth: Nvidia’s $40 billion filled with uncertainty. coupon of just 2.875%. Spreads, as observed by the S&P U.S. Issued High Yield Corporate sell shares as they please. We expect changes around the ways companies approach employee acquisition of ARM; Pursuit of TikTok by Walmart and large technology platforms (both Bond Index, settled at 398 basis points over the 10-year Treasury note in November, the tightest lock ups over the coming months. Keeping an open mind to new possibilities, asking the right questions and seeking out wise consumer and enterprise focused); Salesforce’s acquisition of Slack, Fox’s acquisition of A. MEDIA’S DIRECTTOCONSUMER TRANSFORMATION IS ACCELERATING since late February. The cheaper cost of credit, especially in the back-half of the year, allowed advice has never been more vital, and LionTree’s Capital Markets Advisory service stands ready Tubi; Verizon’s acquisition of BlueJeans; Lululemon’s acquisition of Mirror; Zynga’s many corporations to repay existing debt and shore up liquidity at a critical moment. Now that to help companies think through their strategic alternatives on their path to the public markets - acquisition of Peak Games; The New York Times’s acquisition of Serial; and SiriusXM’s Competition for consumer attention is at an all-time high – including a wealth of companies have more balance sheet flexibility heading into 2021, it will be interesting to see whether that be traditional IPO, SPAC, Direct Listing - and beyond. purchase of Stitcher; IAC’s video platform Vimeo’s investment from Thrive well-capitalized video services, social platforms, audio networks and gaming services – with how their capital allocation priorities may change. massive audiences and robust mobile engagement. This is the new galaxy in which the • Strategic & Financial Synergies: UK merger of Virgin Media and O2UK; Liberty contemporary consumer finds herself. Global’s acquisition of Sunrise in Switzerland; Verizon’s acquisition of Tracfone; Scripps’ acquisition of ION Media; Just Eat Takeaway and GrubHub’s $7.3 billion merger Perhaps the greatest shift within the media landscape over the last 12 months has been on the video side; look no further than the so-called “streaming wars”. As consumer behavior has * Note: On the transactions above, LionTree was proud to have acted as financial advisor to ViacomCBS, eBay and Liberty Global on its UK merger of Virgin Media, and was an investor in Mirror. shifted toward on-demand content over appointment viewing (encouraged by Netflix, much like Amazon trained consumers to expect next-day shipping), legacy media companies have now IV. The New TMT Ecosystem fully embraced the future. Innovation and disruption have gone in house. The days when a company had a digital division have yielded to the reality that every company lives in the digital

economy. At LionTree, we have adapted alongside our clients to oer solutions for their unprecedented challenges, and I take great pride that our organization has truly become an advisor not simply Since last November, scaled media players like The Walt Disney Co., NBC Universal, and for companies in technology, media, and telecommunications, but for all businesses in WarnerMedia have all launched new subscription video streaming platforms, underpinned with transition. Which increasingly is all businesses… extensive content spend and existing content libraries. Disney’s announcement last week that it

plans to release 100+ titles per year, with 80% going on one of its many direct-to-consumer A new ecosystem is fast emerging, buttressed by advanced connectivity infrastructure and At the end of the day, regardless of whether a company chooses a traditional IPO, SPAC or platforms, and annual content spend on its Disney+ platform will reach $8-9 billion by FY2024 driven by direct-to-consumer platforms. New direct to consumer bundles are being created direct listing, they have to live up to their valuation multiple, which is based on long term growth speaks to the power of a scaled player in motion and the immense value of its deep IP library. D. EZ PASS ALTERNATIVES TO THE IPO TOLL ROAD between the major players in distribution and content, examples of which include partnerships expectations. Once a company goes public, whatever path they took, they have to back up that Apple Inc. rolled out with its own subscription service, focused on high-quality original content between Verizon and Disney+ and Discovery+, AT&T and HBO Max, T-Mobile and Netflix, growth under public scrutiny, and to me, it is a healthy dynamic to have public investors decide and sold as a bundle with its hardware. We have also seen ad-supported video platforms take This search for better pricing e ciency at issuance and minimized process friction has led to a and Hulu and Spotify. While the consumer services driving the bundles today are largely which companies gain investment dollars and which do not. If anything, SPACs and direct center-stage this year, with Fox Corp’s acquisition of Tubi, Comcast Corp’s acquisition of Xumo, C. IPO MARKET RESILIENCE, MISPRICING hunt for alternatives to the traditional IPO. Over the last 18 months, we have seen the rise of the video-based, I expect gaming and audio to become more deeply integrated as well. Apple, for listings give companies more options to reach the public market. Nevertheless, once a company and fuboTV’s IPO, not to mention Cheddar and PlutoTV’s growing scale this year under new direct listing (e.g. Palantir, iHeartMedia, Slack) and, of course, the emergence of SPACs example, recently launched a bundle of its own services that includes Apple TV Plus, Apple is public, the regulatory oversight, reporting requirements and investor scrutiny are the same. ownership (Altice USA and ViacomCBS, respectively). The U.S. IPO market also had a volatile year, but bounced back strongly after a slow first half, (“special purpose acquisition companies”) as a viable path to the public markets. Arcade, and Apple Music. The dierence between success and failure means delivering upon growth expectations. We showing enduring strength of the market. LionTree had the privilege to co-manage Warner expect investor patience in this regard to be tried and tested during 2021. We’ve also seen the growing emergence of stronger streaming video distributors: Roku, Apple Music Group’s IPO in June, which became the first scaled TMT company to test the market There have been more SPAC IPOs this year than in the last 5 years combined, and SPACs have Many of the companies in this new TMT ecosystem have spent 2020 and a large part of the last this year, and signaled to the broader industry that the IPO markets were receptive to new represented nearly 50% of all IPOs in 2020 through Dec. 4 - the highest-ever concentration. TV, Amazon’s Fire, Comcast’s X1. More than the new cable, these platforms have achieved scale

by bundling together the growing number of streaming video services into a convenient user latency in an always-on network becomes imperative. By bringing down network latency, this are the DC and Marvel universes, which have an expansive ecosystem of characters, including focused media companies that is looking to podcasting as the future of storytelling (as seen by The share of total retail sales transacted digitally has steadily risen over the last two decades, interface. And aside from selling the hardware, they are generating recurring revenue by selling potent combination promises to revolutionize both enterprise and consumer applications, some of the most popular superheroes and a deeply engaged fan base. Over time, marquee their acquisition of podcast production studio Serial Productions and Audm, a company that but the pandemic has significantly accelerated online penetration trends. In the U.S. alone, monthly subscriptions to premium video channels, and they are even creating their own which allows for the creation of hitherto unthinkable use cases. platforms like Fortnite could become this new internet - where we spend our digital time, turns long form journalism into audio). We expect Amazon and other platform players to online reached 19.3% of total retail sales in Q3 2020, according to the Commerce Department, ad-supported “channels” from licensed content (e.g., The Roku Channel). If the platform interacting with others and where concerts, films, new TV series premiere and even pursue strategic investments in the audio space in the coming year as an integral part of the up from 15.5% in Q3 last year and nearly double what it was 5 years ago (10.1%). Anecdotally, an provider can capture a large enough global scale of consumers who are using it as a bundling Similarly, cable operators are deploying their networks, positioning broadband at the edge of dating. consumer oering in the coming year. entire generation of older people and less tech-savvy individuals across the world were forced to agent, then they can exert some degree of leverage over the suppliers of the content (e.g., to gain the network on a global scale. Internet access is now at the center of the cable value proposition, order essential supplies and groceries online for the first time ever this year. E-commerce a pricing advantage or some other access dierentiation). a bet that has paid o in spades during the pandemic, as connectivity has never been more At LionTree, we believe in the metaverse - and gaming - as a core feature of the digital economy, On the music recording & publishing side, investors have acknowledged the tremendous value adoption does not look likely to slow down any time soon. important. Overall, cable plant rethink oers the bandwidth to reliably handle projected and have invested in this outcome, launching the Gri n Gaming Fund, an interactive entertain- in audio content, with Warner Music Group’s successful IPO (+32% since listing and valued at Competition from technology and social media platforms has also intensified, most notably homeowner and enterprise demands over the next decade-plus, but should also inspire a wide ment-focused venture firm, in partnership with industry veterans Phil Sanderson and Peter $17bn as of Dec. 14, 2020) and Vivendi’s sale of a 10% stake in Universal Music Group to Although the scaled retail “everything stores” continue to dominate the consumer e-commerce with the growth in popularity of TikTok and how quickly more legacy players adapted with range of new services, from enhanced video game streaming, to advanced videoconferencing Levin, integrated with banking expertise led by LionTree’s Nick Tuosto. More broadly, the Tencent (valuing the label at $34bn). We have also seen the monetization of artists’ songwriting market, led by Amazon and Walmart, the growing adoption of e-commerce has been robust similar features and functionality. Streaming media platforms from other players - like Amazon, and applications we have not yet dreamed of. This hasn't been lost on the market, as the stocks enormous demand for gaming content in the private and public markets shows no signs of catalogs for tremendous sums this year (Bob Dylan/Universal Music; Stevie Nicks/Primary enough over the past few years to support several vertical-specific players. These digital-first, Apple, Facebook, Snap, and YouTube - have access to massive, global user bases, and they are of cable pure-plays Charter Communications and Altice USA are outperforming the market. slowing down. Epic Games has reportedly been valued by the private markets this year at $17bn. Wave; Taylor Swift/Scooter Braun/Shamrock Holdings), validating the economic and cultural direct-to-consumer (“DTC”) platforms have flourished by focusing on a specific market accelerating their content investments to keep these user bases engaged. Several digital media Incredibly, Charter’s stock is up +235% since it announced its intention to acquire Time Unity, a software company that makes tools for developers to create console, mobile and PC value of music. segment, rethinking the customer experience, and building community around their brand. companies, like Group Nine Media, have grown scaled video content powerhouses, built Warner Cable in May 2015 (through Dec. 14, 2020), demonstrating the power of scale and titles, went public this summer in an IPO that raised $1.3bn and valued the company at $13.7bn Some examples include Warby Parker (eyewear), Harry’s (personal care), Chewy (pets), Thrive authentic brands, and attracted devoted fan-bases by leveraging social media platforms like reflecting management’s ability to execute. Those who lay foundations now will be poised for - and is now valued at over $45bn by the public markets (as of Dec. 14, 2020). Many Trend-wise, Spanish-language music continues to take o in the English-speaking world, Market (organic grocery), Wayfair (home decor), and Kaval and Rent The Runway IGTV and Snapchat for distribution. The nexus between media and tech is where the future of success in the future. well-known gaming companies around the globe have also committed to paths to go public via feeding cross-cultural opportunities. In January, Saban Music Group launched with a (beauty/fashion/apparel). Looking ahead, I expect to see more DTC e-commerce brands our attention lives. SPAC transactions as well, including the completed SPAC transactions of Rush Street Interac- $500mm commitment from Saban in partnership with Universal Music Group with a heavy flourish, especially in the first-half of 2021, as pandemic purchasing behavior settles into habit C. BUILDING THE INTERACTIVE ENTERTAINMENT METAVERSE tive and Golden Nugget Online Gaming, as well as the announced SPAC transaction of Skillz, focus on Latin-urban music, and in November, hip-hop pioneer Cash Money Records – the and the path to reopening brick and mortar specialty stores remains uncertain. where LionTree is acting as financial advisor. independent label that launched Drake, Lil Wayne and Nicki Minaj, to name a few - announced The explosion of interactive entertainment has been one of the biggest trends of 2020. Since the creation of a Latin music division, focused on the fusion between Rap and Latin Pop. Luxury fashion, in particular, is one vertical that I think will experience accelerated the onset of the COVID-19 pandemic, the global video gaming industry, including mobile, Looking ahead, I expect the accelerated growth, engagement, and monetization of the Audio is about much more than content and distribution. Artists are increasingly turning to e-commerce volumes in 2021. Historically, luxury brands have been late to embrace cloud, and live-streaming, have experienced accelerated growth, engagement, and monetization interactive entertainment sector to lead to increasing strategic activity and even more music-focused software platforms and toolkits like Splice for royalty-free samples and e-commerce, as digital storefronts and anonymous sellers clashed with the industry’s emphasis as the pandemic has increased the amount of time people are spending in front of screens. This, companies looking to the public markets for opportunities to trade at premiums within the instrumentals, changing the creative process. Companies such as HIFI are leading the fintech on experience and exclusivity, and in some cases, allowed counterfeiters to thrive. But, the coupled with the ease at which games can be developed and distributed has led to more people gaming sector compared to private valuations. revolution in music, helping artists organize their financial rights and royalties. Even short-form coronavirus pandemic has revealed just how important e-commerce is to the future of luxury than ever experimenting with video games. The pool of addressable gamers has expanded, audio adult entertainment companies like Quinn and Dipsea are set to revolutionize an goods. Global online luxury purchases were worth $58bn in 2020 through mid-November encompassing a wider range of age groups and more gender diversity than ever before. enormous industry, redefining pleasure for the masses (or so my friends have told me). (23% penetration), compared with $39bn in 2019 (12% penetration), according to Bain & Co. data. We expect this category to continue to thrive in the coming years as the luxury industry The boom in video games, however, has not been solely driven by an expansion in time spent. Despite being one of the oldest forms of media, audio assets and the greater opportunity remain embraces technology more fully. Part of the transformation has been driven by a shift in a way people interact and entertain, a undervalued. Audio will be a key component of the next wave of content and consumption, and shift that the pandemic lifestyle has accelerated. And while we do expect a return to it is set to continue to grow, even given the outsized attention and investment dollars lavished Social commerce is another theme I see taking hold more firmly in 2021+. Social media and out-of-home entertainment (like live music and travel) to rebound in 2021, video games are on the video industry due to the content spending habits of Netflix and the existential threat it digital advertising companies – notably Facebook, Alphabet, Pinterest and TikTok – are here to stay as a form of interaction. I believe that people inherently yearn for meaningful has posed to the media industry for the last decade. More step-changes to come as the industry building more tools to enable and integrate shopping / selling capabilities for all users on their communal interaction, and during the pandemic, we have seen the acceleration of interactive consolidates and the spending and monetization gap compared to video content narrows. platforms. Facebook has partnered with software companies Shopify and BigCommerce to help entertainment platforms being used as a conduit for bringing people together, in a virtual small businesses turn their social media presence into digital storefronts. Walmart’s announced setting. For many users, it is becoming an increasingly vivid reality that gaming is the new V. The Digital Economy investment in TikTok this summer speaks to both companies’ interest in social commerce and internet: a place not just to visit, but where entire dimensions of life transpire. suggests they see it as an important avenue for their future growth. People turn to social media and search platforms for inspiration, recommendations from their networks, and product B. THE EDGE: THE INFRASTRUCTURE MIGRATION The coronavirus pandemic has accelerated the adoption of e-commerce, and there is Epic Games – the publisher of Fortnite and developer of the Unreal gaming engine – has been research. Over time, this user intent will be increasingly funneled into purchase behavior. This Our existing network was built for human to human connection and now needs to be rebuilt to tremendous energy and investment devoted recently to what the intersection of retail, particularly innovative in the ways it leverages its platform and user base to drive engagement. convergence is happening before our eyes, and it is one to watch closely. handle the mass of data generated by machine to machine communication. The explosion of distribution and media might look like in the future. This is an area particularly ripe for Within its world, the company has live-streamed virtual concerts from Travis Scott and data usage, IoT and connected devices have pushed capacity utilization to the edge of our reinvention. Marshmello that have each attracted more than 10 million players, and partnered with Disney networks. 5G is an enabling technology that oers the prospect of substantially increased B. THE TECH REGULATORY ENVIRONMENT to debut an in-game exclusive trailer ahead of the launch of the film, “Star Wars: Rise of speeds while edge computing provides low latency computing power on the network which will Within e-commerce, one of the biggest overarching themes we focus on at LionTree is the Skywalker.” Roblox attracted nearly 1.2mn unique players to its platform when it hosted a fan drastically change certain industries over the next three to five years. The most complicated digitalization of consumer businesses. It is one of the most profound meta-stories of our In October, the U.S. House Judiciary Committee released a report on “Big Tech,” the most meetup for pop singer Ava Max inside its virtual world. There have even been several instances digital systems and most evolved 5G networks have to live somewhere, and that residence is D. MUSIC AND AUDIO EVOLUTION: THE “EAR” REMAINS UNDERVALUED moment, and the key to understanding where the economy is moving next. The legacy media significant government investigation into U.S. technology firms since Microsoft in the 1990s. In this year of gamers conducting virtual weddings within Nintendo’s Animal Crossing: New increasingly closer to the user. This is the underlying infrastructure for the shift to the future industry was one of the first to be impacted by this broader market shift, but it will not be the it, the Committee concluded that Facebook, Apple, Amazon and Alphabet/Google have Horizons. and companies such as Verizon at scale and Fastly and Cloudflare are enabling this progression. Amidst the transformations reshaping the video industry, only a handful of major media last. Software and tech DNA is increasingly woven into the foundational strategies of a wide monopoly power in their key business segments and have abused their marketplace position to companies are focused on the rapidly expanding Audio opportunity, and they are largely audio range of industries. achieve anti-competitive dominance. To remedy the current situation, they proposed measures This so-called metaverse is the “future state” of Interactive Entertainment - it can leverage 5G and edge computing work together to enhance the capacity of the network to host the pure-plays. Companies like iHeartMedia, SiriusXM, and Spotify are investing in and leading such as reforming antitrust laws and possibly even breaking the companies up in what they refer many game modes, forms of media, and IP within one environment, facilitating a prosperous countless number of connected devices on it, from sensors to autonomous vehicles to medical the evolution of audio, focused on music streaming (on-demand and lean-back modalities), A. ECOMMERCE AT SCALE to as “structural separations”. In addition to the U.S. scrutiny in tech, the EU will likely be in-game economy where users can transact and socialize. Examples of this in broader Media wearables. With more data-reliant devices surfacing on the network, the expectation of low podcasting and content production. The New York Times is one of the very few “non-audio” demonstrating more substantive action as we saw recently with the proposed digital tax.

sector is towards leveraging digital platforms to facilitate upskilling and training – outside consideration for consumers and business. Companies like CLEAR are rising to the concept” earlier in the development cycle, driving interest and capital within a new While the report provides only a high-level assessment of the competitive landscape, with of the traditional education ecosystem – to better prepare individuals for the workforce challenge with next generation digital identity platforms. CLEAR is well positioned to investor base. recommendations that could serve as guidance for future legislation, there is bipartisan support and/or provide them with the skills they need to accelerate their career development. extend its leadership position in the travel segment to broader consumer and enterprise for continued reforms in the tech landscape, and there are a number of lawsuits and Chegg, which is best-known for its digital and physical textbook rentals and online applications, with the pandemic accelerating the already large market opportunity in front VI. LionTree’s “+” Moment investigations that have been piling up against Big Tech companies at the federal and state level. tutoring, has been a leader in this area, with its recent acquisitions of Mathway and of the company. Biometric identification technology platforms are the way of the future, Earlier this month, the FTC and a coalition of attorneys general from 48 states and territories Thinkful. Joytunes, an Israeli VC-backed company, is revolutionizing the at home music not just for access and payments at airports or stadiums, but to accelerate the opportunity The new ecosystem is taking shape all around us: digitization is the whirlwind that is remaking filed two separate antitrust lawsuits against Facebook, alleging anti-competitive conduct that learning process through their proprietary gamified interface aiming to be the “Netflix” for workforce and venue transparency in a way that might not have existed before. Our the landscape, even as 5G and broadband lay the infrastructure for tomorrow. The DTC + could result in requiring Facebook to divest WhatsApp and Instagram. platform for education. digital identity will become a core component of who we are. services have already altered how we consume content and forced companies to innovate and deliver more. In this world, the + is essential. The sum of these changes is that events don’t The new U.S. Congress, which convenes in January, will likely have tech reform at the top of • Health & Wellness: This is one of the last multi-trillion dollar markets yet to be • Online Travel & Tourism Technology: After the pandemic, people will travel again, and follow algorithms and fundamentals are predictive but not prophetic. A world that is opening their agenda, since it resonates with both sides of the aisle. We have always said it is inevitable disrupted, and is still dominated by physical doctors’ o ces, clinics, and gyms… but that is I would argue that after months of quarantining at home, experiencing the sights, people and closing in unexpected ways requires farsighted flexibility. Nobody can predict when the that U.S. technology companies do get regulated, but I think it is more probable to remain a changing. Just as mobile devices and cloud computing technology have empowered and culture of the world’s iconic destinations will be in high demand. While 2020 has next wave will come, or what it will look like. But the wise carry a suroard, just in case. headline risk for Big Tech and would be surprised if any substantive action were to be taken in on-demand and frictionless transactions in sectors like video (Netflix), music (Spotify), undoubtedly been a challenging year for the travel sector, I would count on the terms of break ups. One policy area where I think we could see reforms is Section 230 of the transportation (Uber), sports betting (DraftKings), and insurance (Lemonade), I believe tech-enabled online travel platforms to rebound strongly once the pandemic is under The pandemic has made our constellation of communities and networks coalesce and grow 1996 Communications Decency Act, which has implications for how social media companies mental health (Calm, Headspace), digital health (Oura), and wellness (Noom) are the next control. OTAs like Booking Holdings, Expedia, and TripAdvisor are among the most stronger. LionTree might be best known for our work on core sub-sectors of global media, moderate and police content, and has faced criticism from politicians on both sides of the aisle. industries to be completely digitized. Look at companies such as Oscar who have taken the innovative and consumer-focused companies in the digital economy. Airbnb has just gone content and distribution, but we also continue to devote our focus and capital to areas like audio ambitious leap to simplify and streamline the broken U.S. health insurance industry via public in a $3.7 billion IPO, valuing the company at $47 billion, a huge vote of confidence (via our MUSIC partnership), gaming (via Gri n), and investing alongside clients, friends and C. PANDEMIC PARADIGM SHIFTS: FINTECH, EDTECH, HEALTH & WELLNESS TECH, ONLINE TRAVEL, innovative tech and a consumer-friendly brand. Wearable device company Whoop and in the sectors (as well as the company’s) long-term viability from public market investors. legends alike. FOODTECH Mirror (both LionTree investments) gained rapid adoption this year as consumers LionTree has invested in GetYourGuide, an exciting digital marketplace to search for and increasingly embrace the use of data and technology to optimize their body’s performance. book one-of-a-kind travel experiences, giving the whole world access to incredible tours Kindred, LionTree’s expressions ecosystem and digital media consultancy platform, including been in business for over a thousand years. It is one of 19 such millennia old businesses in Technology-enablement is now driving significant changes to industries – like Finance, • Underlining their early success, Whoop achieved a $1.2B valuation this October, and and attractions. I expect these online travel platforms will lead the recovery of global our daily newsletter, is driven by our commitment to the intersection of culture and community. Japan. A professor interviewed by the New York Times to comment on this astounding longevi- Education, Health & Wellness, and Travel – and is also sparking innovation in Food to create Mirror secured an impressive exit in its sale to athleisure company Lululemon this tourism in 2021+ and will likely play a central part in the continued consolidation of the Our podcasts like KindredCast and the VaizeyView host conversations that give voice and ty explained, “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in new healthy and sustainable protein alternatives as well as cold storage solutions. The June. The traditional healthcare vertical is poised for digital transformation as well, industry. texture to the latest news. After years of the news media shadow-boxing with President Trump, a relay race. What’s important is passing the baton.” Naomi Hasegawa, whose family has owned COVID-19 pandemic has accelerated the digital transformation of these sectors, and we at and this year we have seen unprecedented levels of investment and maturation in the I believe that rethinking is in order: towards the edge consumer, emerging from the populace Ichiwa for ten centuries, explained “To survive for a millennium, a business cannot just chase LionTree are proud to support the continued growth of several businesses in these critical space, from the IPOs of GoodRx (LionTree acted as co-manager) and Amwell, to the • Food Tech & Supply: A growing interest in personal health, animal welfare, and climate and locally focused (companies such as Brut, ATTN, Axios, and GB News out of the UK). profits. It has to have a higher purpose.” sectors, driven by a bias towards transformation. merger of Teladoc and Livongo, to the pending acquisition of hims & hers by the and sustainability (global food systems are responsible for 25% of greenhouse gas Kindred Media’s investment and partnership with The Baer Faxt, a leading weekly newsletter Oaktree Acquisition Corp SPAC in a go-public transaction (LionTree is advising hims emissions) concerns have all driven companies to harness technology to develop covering the art world, also reflects attention to an industry we believe is ripe for reinvention. That is our mandate as well. Our success is tied to the grace and grit with which we prioritize • FinTech: The financial services industry continues to attract tech companies that & hers management). alternative proteins. The pandemic also brought this trend into focus early on when our Kindred will further expand on our thesis going into Q12021 with further collaborations and succession: the world as we leave it, not the world as we found it. Passing the torch is essential transform how people and businesses spend, save, borrow, invest, and more. A particular food supply chains strained against the pressures of the shutdown. Early pioneers such as interests in this space. for keeping it lit. LionTree’s pipeline going into the new year is stronger than ever. What has hallmark of best-in-class fintech companies is their application of technology like AI to a • Sports: Live sports, which by all measures was operating at its peak prior to COVID, was Beyond Meat and Impossible Foods have popularized plant-based meat substitutes while become crystal clear is that not only the medium and message matter, but that the messenger specific element of the finance industry value chain to create innovative solutions that upended by the pandemic. From Little League to the Olympics, no organization was others include Yofix (a LionTree investment), maker of dairy-free yogurt products, In addition to our ever-expanding M&A Advisory business, LionTree’s Capital Markets service does as well. Credibility and conviction, adaptability and authenticity, are qualities that are optimize and improve a pre-existing process and the customer experience. Cross River, a spared. Whether it was no games to games in a bubble, we lost one of our great global Memphis Meats, creator of lab grown / cultured meat products, Good Catch Foods, the stands ready to help companies think through their strategic alternatives on their path to the evergreen but are in particular season these days. Let’s begin anew, again. What comes next is company in which LionTree has proudly invested, has built a banking-as-a-platform communal rituals. However, what the pandemic has wrought is not so much a complete vegan “seafood” brand, and Coconut Bliss, the plant-based ice cream company (now public markets - whether that be traditional IPO or SPAC and beyond. For traditional IPOs, we up to us. Focus on the future and make life where you are. Be adaptable to changes and be with service platform that allows other fintech companies to plug-in and access multiple re-ordering of sports, and related fitness and wellness, but rather an acceleration of many majority owned by HumanCo, a LionTree investment). Alternative “milk” products - like operate as part of the syndicate as a co-manager, and focus on connecting issuers to the core your communities. As we roar into the 2020’s, we are turbocharged by trust and catalyzed by banking services that they can customize for their own client bases. Lemonade has trends that were already accumulating just below the surface. Sports were bound to oat milk and oat ice cream from Oatly (also a LionTree investment) - have also flourished, nucleus of the most-influential investors who dominate an IPO’s value creation. For SPACs, we curiosity. leveraged AI to make booking renters’ and homeowners’ insurance a quick and frictionless change. We watch, consume and participate largely in the same ways we have for decades. growing to a ~$2 billion market in the US, or ~13% the size of the US dairy milk industry. counsel companies who plan to go public, underwrite SPAC IPOs, and advise SPACs on finding process. Public.com has built a brokerage platform that allows people of all backgrounds to Few sectors could match that claim. Generational change and technology have long The pandemic accelerated the demand for these types of food alternatives (as it and acquiring a target company. Our model is motivated by achieving the optimal outcome for The Roman philosopher and emperor Marcus Aurelius wrote, “Most of what we say and do is seamlessly invest in stocks, as well as exchange ideas and talk about business and financial knocked on the door of sports transformation and now they will finally break through. The highlighted the risk of animal-to-human disease transfer), and AI has now infiltrated many the issuer and will remain a committed partner, as we view a public oering as simply “step one” not essential.” We no longer have that luxury. The era of the essential is here. May the coming news. Sweden’s Klarna oers shoppers interest-free financing on retail purchases over a estimated $12.6bn already invested in sports technology companies is one signal. The rise parts of the manufacturing, production and delivery/storage process. in the next leg of a company’s journey. year be one of healing and reinvention. period of installments, and demonstrates that not all technological innovation is born in of personalized streaming, augmented reality, e-sports, sports betting, biometric access, LionTree’s Merchant Bank invests our capital alongside clients, family o ces and Silicon Valley. and connected fitness are examples of many more. This will be an exciting moment for this • Space & Aerospace: A confluence of factors is driving a new “space race”, bringing us entrepreneurs. We leverage all facets of our business to explore new thematics and geographies See you in 2021+ industry and one that will lend itself to incredible investment opportunities that we aim to closer and closer to more fulsome exploration and exploitation of the “final frontier”. while driving insights and innovation. Our portfolio is a balance of LionTree's history and future • EdTech: The COVID-19 pandemic has highlighted the urgent need and global be a larger part of early next year. We are proud to have recently advised Excel Sports Rapidly declining satellite production and rocket launch costs are lowering the barrier to with investments in Sports & Music but also expansion into the Future of Food and Fintech, all Aryeh B. Bourko under-investment in technological processes and resources to improve education. Many of Management on its agreement to sell a strategic minority investment to Shamrock Capital, entry, while U.S. regulation in the space ecosystem (notably, 2015’s Commercial Space while co-investing with clients and close relationships. We are also exploring Emerging CEO | LionTree LLC us with children have learned first-hand this year that schools, teachers and students were which will allow the agency to tap into some of these new areas of development at the Launch Competitiveness Act) is playing a part in increasing private company accessibility Industries in Urban Mobility, Virtual Reality and Augmented Reality, while looking at the stars not at all ready for a sudden move to online teaching, which was expected to be years away. intersection of the sports and media landscape. We are also an investor in fuboTV through to space. The result has been a proliferation of new entrants, powered by private capital and investing in the burgeoning Space industry. That day in the future has arrived in our present. I anticipate accelerated digitalization of our merchant bank, which completed its IPO in Q4 and recently announced exciting plans and creativity, fueling space tourism (Virgin Galactic), space exploration (Blue Origin, this sector, as digital spend on education inflects in the coming years (digital just ~2.5% of to develop a sports betting oering. SpaceX), and commercial launch services (Virgin Orbit, Relativity Space). It has also led total global education spend, pre-COVID). Outside of tech-enabled improvements to the to innovation in the flagship communications satellite services business led by Viasat, I want to leave you with the story of Ichiwa. You might not have heard of it, or seen it on the K-12 and university-level learning experiences, a major trend I see gaining steam in the • Digital Identity + Health: The pandemic has made “trusted identity” an even important among others. Changes in business models and technology will also allow for “proof of Fortune 500. It is a small mochi shop in Kyoto, and it won’t be a target of the latest SPAC but it’s

20 Reading List

One of the silver linings of this year has been the incredible amount of time opened up by lack of travel, business dinners, and the like. I imagine I’m not alone in admitting that I loved every minute of bingeing on my favorite shows and spending nights at home reading - a lot.

Despite not being able to record live and in person, I had the great pleasure of interviewing incredible leaders this past year on our KindredCast Series including to name a few; cities advocate, Author and Professor Georey West, tennis legend and investor Serena Williams, Verizon Chairman and CEO Hans Vestberg, philanthropist and supermodel Naomi Campbell, former UK PM Tony Blair in conversation with our EIR Lord Ed Vaizey, FinTech’s pandemic super star Gilles Gade of Cross River Bank, and art advisor Josh Baer and Jackie Reses on how the crisis is changing the face of the global art market.

Hope you enjoy all the content shared below.

• Chasing My Cure: A Doctor’s Race to Turn Hope into Action; A Memoir - David Fajgenbaum

• Elizabeth I CEO: Strategic Lessons From The Leader Who Built An Empire - Alan Axelrod

• Every Life is on Fire: How Thermodynamics Explains the Origins of Living Things - Jeremy England

• The Fractured Republic: Renewing America’s Social Contract in the Age of Individualism - Yuval Levin

• The Future Is Faster Than You Think: How Converging Technologies Are Transforming Businesses, Technologies and Our Lives - Peter Diamandis

• The Home We Build Together - Rabbi Lord Jonathan Sacks z”l

• Hello Darkness, My Old Friend: How Daring Dreams and Unyielding Friendship Turned One Man’s Blindness Into an Extraordinary Vision for Life - Sanford Greenberg

• Blindspot: Hidden Biases of Good People - Mahzarin Banaji & Anthony Greenwald

• The Infinite Game - Simon Sinek

• The Invention of News: How the World Came to Know About Itself - Andrew Pettegree

• Man's Search for Meaning - Viktor E. Frankl

• Mastering the Market Cycle: Getting the Odds on Your Side - Howard Marks

• Never Lost Again: The Google Mapping Revolution That Sparked New Industries and Augment Our Reality - Bill Kilday

• Out of the Gobi: My Story of China and America - Weijan Shan

• The Powers That Be - David Halberstam

• The Tyranny of Merit: What’s Become of the Common Good - Michael Sandel

21 • Viruses, Pandemics, and Immunity - Arup K. Chakraborty & Andrey Shaw

• Which Side of History?: How Technology Is Reshaping Democracy and Our Lives - Jim Steyer

• You’re Not Listening: What You’re Missing and Why It Matters - Kate Murphy

• And lastly… watch if you haven’t yet - Dave Chappelle’s 8:46 Special

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