Soho House & Co is facing an “existential crisis” with questions over its future viability as a public company, according to an eviscerating report from GlassHouse Research.
The report accuses the private members’ club operator of having a “broken business model and terrible accounting”.
It argues a “persistent lack of profits and rising debt” put the company in a precarious situation where they will need to continue to dump shares on investors.
GlassHouse, which said the value of the company was essentially worthless, disclosed in the report that it has short positions in Soho House and stands to benefit if the price of the stock decreases.
According to the report, Soho House has never been profitable in its 28-year history, and went public to “dump” on retail investors, while its debt “surged to insurmountable levels”.
The journey of the company is “eerily similar” to WeWork’s public offering, and GlassHouse believe it will meet the same fate.
While it once held an “esteemed position” in the luxury leisure sector, it is now needing to expand to less affluent cities for revenue growth.
Meanwhile it has been subject to complaints of overcrowding, a decline in service quality and accusations it is “losing its exclusive appeal”.
GlassHouse said its findings paint a “sobering picture of a company hurtling towards financial ruin”, and facing the “looming spectre of bankruptcy”.
Less than three years since the chain floated in New York at $14 a share, the price is now sitting at $5 a share. A business that was worth $2.8bn is now valued at $975.1m.
Soho House declined to comment.
