Drama is usually best served on a West End stage or in an episode of “Coronation Street,” but there’s been plenty to digest in recent months in the financial filings of publicly traded Soho House.
If you’ve been following Soho House’s arc over the years, from their pre-IPO road show to rapid expansion, you know this brand loves a bit of theater. But the last week has been less about vibey rooftop cocktails and more about closing time scramble in a mad dash to return the company to being privately held entity.
After a nail-biting few days where it looked like the whole go-private deal might collapse, Soho House has secured the alternative funding needed to exit the public markets, according to a U.S. Securities and Exchange Commission filing on Wednesday.
But how did it get so dicey in the first place?
The Scramble
As yours truly has previously reported, the public markets have never quite known what to do with Soho House. Is it a hotel company? A real estate play? A tech-enabled subscription service? A chic-but-crowded spot to enjoy batched spicy margaritas, er, picantes?
The answer was always “yes, but...” — usually followed by questions about when it would actually turn a profit.
That disconnect is why the take-private offer from MCR Hotels last year made so much sense. But then came the plot twist: MCR’s fund notified Yucaipa — former Soho House owner Ron Burkle’s investment firm, which maintains a majority control of the brand — earlier this month that it couldn’t cough up its $200 million closing commitment.
For a moment, the deal looked dead in the water. The stock slid 10% last week.
But as of yesterday, the gap has been plugged. According to a new SEC filing, a mix of personal capital, debt reshuffling, and existing investors doubling down has saved the day.
The $200 Million Patchwork
The new capital stack is a fascinating look at who really believes in this brand (and who just wants to get the deal done). Here is how they filled the $200 million hole:
- Tyler Morse Steps Up: In a move that screams "skin in the game," Tyler Morse, the CEO of MCR, is personally stepping in. His entity, Morse Ventures, is putting up a $50 million equity commitment.
- MCR is Back In: Despite the initial fund failure, MCR has notified the company it will be funding $50 million of its original commitment.
- More Debt (Duh): Apollo and Goldman Sachs (referenced in the filing as “HoldCo Financing Sources”) agreed to upsize their senior unsecured notes facility from $150 million to $220 million.
- Rolling Over: Perhaps most telling is that existing backers are choosing to stay for the ride rather than cash out. Richard Caring and the Goldman Sachs Funds amended their agreements to roll over additional equity, keeping about $50 million worth of stock in the private company rather than taking the payout.
A messy end to a messy public run
When I covered Soho House following its IPO in 2021, the narrative was all about the “membership waiting list” — that legendary backlog of creatives clamoring to get in. Consider it the Soho House bragging equivalent of hotel CEOs touting net unit growth on earnings calls.
But the challenge was always balancing that exclusivity with the public market's demand for infinite growth. You can’t clone the vibe of the original Greek Street house 50 times over without diluting the product.
This eleventh-hour financing shuffle proves two things. For starters, the “smart money” still sees value. Richard Caring and Tyler Morse putting their own equity on the line suggests they believe the core business is worth more than the battered public stock price suggests. They are betting that without the glare of quarterly earnings calls, they can fix the operations. But we must also acknowledge a second point: The public market experiment failed.
This brand was never meant to be a public company. The scrutiny on its net losses overshadowed the genuine stickiness of the membership model. The land of picante isn’t meant to lose sleep over RevPAR.
What’s Next?
The company expects to close the merger by later this month.
For the members sipping cocktails at Soho Beach House Miami today, nothing changes. But for the investors, the real work begins now. Going private gives them the cover to potentially slow down the breakneck expansion critiqued in the past and focus on what made the brand cool in the first place: exclusivity.
We now know the money is there. Let’s see if the magic is still there, too.