Soho House is crumbling—according to GlassHouse Research, at least.
The research company has published a scathing report claiming that Soho House & Co, Inc. has a “broken business model” and “terrible accounting.” The company added that SHCO’s “persistent lack of profits and rising debt levels” have put it in a “precarious situation” that could affect its future viability.
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SHCO oversees chic hotels and private members’ clubs across the globe, including Soho House, the Ned, and Scorpios Beach Club. The chain floated in New York at $14 a share less than three years ago but recently dropped to just $5 a share, according to The Times. Once worth $2.8 billion, the business is now valued at $975 million.
GlassHouse Research alleges Soho House is expanding into less affluent cities and increasing the number of memberships, which in turn is reducing its exclusivity and affecting customer service. (It currently has 42 locations and 184,542 members, the report says.) It also purported the company is “hurtling toward financial ruin” and could end up going bankrupt like WeWork.
Shares of the company slumped by 30 percent in intraday trading on Wednesday before closing down 19 percent. Shares then surged 13 percent premarket on Thursday after SHCO spoke out against the report.
“Soho House & Co Inc. fundamentally rejects the recent report published by GlassHouse Research, which contains factual inaccuracies, analytical errors, and false and misleading statements, all designed to adversely impact the company’s stock price for the benefit of the short-seller,” SHCO said in a statement. “The company was not contacted for any comment or clarifications prior to the report being released.”
SHCO added that it is confident in the strength of its business and is focused on executing its strategy. It said that an independent committee was formed in the fall of 2023 to evaluate strategic transactions, some of which may result in Soho House going private.
SHCO plans to share its 2023 results on March 6. It will also issue guidance for this year, with the expectation of continued growth in membership, revenues, and cash flows. GlassHouse Research issued a rebuttal a few hours after the announcement.
“Soho House rejects our report, says it has inaccuracies/errors, but does not list anything,” the company tweeted. “The company also expects growth in its made-up metric adjusted EBITDA, but says nothing about free-cash-flow or GAAP EPS. So, there you have it, more years of actual losses.”
The proof will be in the results, we suppose.