Soho House Tumbles After Short Seller Draws WeWork Comparisons

Carmen Reinicke, Bloomberg News

(Bloomberg) -- Members-only Soho House & Co Inc. might just be the next WeWork Inc.-style flop, according to a short report from GlassHouse Research.

Shares of the luxury hotels and clubs operator plunged as much as 30% intraday — the steepest drop ever for the stock — before closing down 19% Wednesday at $5, after GlassHouse initiated coverage with a $0 price target. The report questioned the firm’s viability given its growing debt and lack of profit.

“Eerily similar to WeWork’s public offering, we believe SHCO will eventually meet the same fate as the now defunct co-working space,” GlassHouse analysts wrote in the report.

GlassHouse and the authors of the report disclosed holding short positions as well as put options in Soho House. London-based Soho House didn’t respond to multiple Bloomberg News requests for comment outside its normal business hours.

Read more: Soho House Owner Falls in Trading Debut After Low-End IPO

Soho House has struggled to capture investor enthusiasm with shares trading more than 60% below the company’s July 2021 initial public offering price of $14.

In its November earnings release, Soho House reported a wider-than-anticipated loss and revenue that failed to meet Wall Street’s expectations. Wet summer weather and the temporary closing of the company’s Tel Aviv location weighed on the quarter.

Read more: Soho House Slides On Weather, Temporary Tel Aviv House Closure

Still, the stock was a winner last year, rebounding from a December 2022 all-time low to gain more than 90%, and Wall Street is overwhelmingly positive on the company.

Soho House has five buys, two sells and zero hold ratings, according to data compiled by Bloomberg. The average analyst price target of nearly $9 a share represents nearly 80% upside.

GlassHouse’s recent calls have included strong sell opinions on Granite Construction Inc. and Catalent Inc. Shares of Granite Construction have gained roughly 25% since GlassHouse’s Sept. 27 report. Catalent is up about 24% since the firm released its report in December 2022. Catalent’s stock has been lifted in part by a pending acquisition after its facilities were plagued by manufacturing issues.

GlassHouse did not respond to emails seeking comment.

Soho House’s market value fell below $1 billion Wednesday. It was worth nearly $3 billion at its peak.

(Updates with stock moves at market close.)