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Members club group Soho House said that its biggest shareholders are considering taking the New York-listed company private, in response to a short seller report that described its 2021 public listing as being “eerily similar” to that of bankrupt co-working company WeWork.
Soho House said on Friday that a special committee of the board had begun to evaluate “certain strategic transactions, some of which may result in the company becoming a private company” in the autumn. The group added that there were “no assurances” that the review would result in a transaction.
The announcement that Soho House — whose controlling shareholder is American retail billionaire Ron Burkle’s Yucaipa investment vehicle — has been considering a return to a private company comes just days after New York-based short seller GlassHouse published research criticising the group.
Soho House’s share price fell by 19 per cent in intraday trading on Wednesday, but after the announcement on Friday morning, the stock bounced back to approaching $6, close to its price before the short report was published.
Soho House — which operates 41 members clubs worldwide with more than 250,000 members, and whose brands also include the Ned — went public in 2021, floating 18 per cent of its stock on the New York Stock Exchange to much fanfare. But the share price has struggled since, tumbling around 60 per cent from its listing price of $14.
In a Securities and Exchange Commission filing, Soho House said that it “fundamentally rejects” the short report, which accused the members’ club group, founded by British hospitality veteran Nick Jones in 1995, of being “a company with a broken business model and terrible accounting”.
The GlassHouse report “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”, Soho House added.
In its report published on Wednesday, GlassHouse criticised Soho House for having a growth strategy reliant on expanding into less affluent cities, such as São Paulo, for failing to turn a profit in its 28-year history and for overcrowding at its venues that hurt customer satisfaction.
The short seller also took issue with Soho House’s “mountain” of debt maturities, with $607mn coming due in 2027 and the company’s “questionable accounting practices”, including a decision to pull forward millions of dollars of revenues by introducing a credits programme for new members.
GlassHouse, which describes itself on its website as “a team of forensic accountants”, began analysing Soho House’s accounts around six months ago, according to a person close to the firm.
Soho House also announced on Friday that it would commence a $50mn share buyback programme. The board — which is led by Burkle and also includes Jones and former majority owner Richard Caring — owned 74 per cent of the stock, the members club group noted. Board members “had been active purchasing shares” at an average price of around $6 a share, the company added.
In response to the announcement, GlassHouse said on X, formerly Twitter, that “Soho House rejects our report, says it has inaccuracies/errors, but does not list anything.”
