LONDON, June 23 (Reuters Breakingviews) - Soho House is trying to keep the party going. It’s more than 25 years since Nick Jones opened his private members’ club in London’s West End. He now has 28 outlets from Toronto to Tel Aviv, operates co-working spaces and a beach club on the Greek island of Mykonos, and boasts more than 119,000 members. Yet the business is heavily indebted and has never turned a profit. A New York initial public offering potentially valuing the company at $3 billion is vital for its expansion plans. Jones’s formula for hip-yet-relaxed clubs and hotels has won a loyal following. Though many of its venues closed during the pandemic, Soho House retained 92% of its members last year, while its waiting list swelled to 48,000. Indeed, more than 5,000 people pay $2,600 a year for membership even though there is no club in their city. Fans can also buy Soho House furniture and bed linen for their homes. Yet this success has yet to benefit the bottom line. As Membership Collective Group, Soho House’s parent company, states in its IPO filing: “We have incurred net losses in each year since our inception.” The pandemic hasn’t helped. In 2019, the company earned average revenue of $5,350 per member; last year that fell to $3,200. Its operations burned through over $100 million in the first quarter of 2021. Soho House’s finances looked distinctly downmarket even before Covid-19. Adjusted EBITDA halved to $18 million in 2019. Net debt is still around $750 million, even after the company refinanced an expensive loan from buyout firm Permira in March. Undeterred, Jones is betting on a post-pandemic bounce. He’s planning to open 18 more Soho House outlets in the next two years, while adding WeWork-style shared offices. By using partners to finance real estate and refurbishment costs, the company reckons it can lower the cost of opening a new club by as much as two-thirds. It’s also hoping to develop The Ned, a club for financiers in the City of London, and the Scorpios Beach Club into membership-based chains. The promise of continued growth may persuade U.S. investors to look past MCG’s rickety finances, Chairman Ron Burkle’s super-voting shares and the VIP-sized $5.7 million the company paid Jones, its CEO, last year. A successful IPO would enable Soho House to keep expanding. It would also delay answering the key question of whether a private members’ club can combine scale, exclusivity and profitability. Follow @peter_tl on Twitter CONTEXT NEWS - Membership Collective Group, which owns the Soho House chain of private members’ clubs, on June 21 filed for an initial public offering on the New York Stock Exchange. - Soho House, which opened in the London district in 1995, now operates 28 clubs across Europe, the United States and Asia. It also runs The Ned private members’ club in the City of London, and Scorpios, a beach club on the Greek island of Mykonos. As of April 4, MCG had 119,000 members. - MCG reported revenue of $384 million for 2020, down from $642 million in the previous year, as the Covid-19 pandemic impeded travel and forced some clubs to close. Its net loss deepened to $235 million, from $128 million in 2019. The company has not reported a net profit since it was founded. - In March MCG issued senior secured notes worth $441 million to funds managed by Goldman Sachs. At the same time, it raised $162 million by issuing convertible preference shares. It used the proceeds to repay a loan from Permira, the buyout firm. - As of April 4, the company had total debt of $826 million, not including operating leases. - JPMorgan, Morgan Stanley, Goldman Sachs, Bank of America and HSBC are joint bookrunners on the IPO.