Online retailer Boxed is considering filing for bankruptcy as the cash-starved company faces pressure to make millions of dollars in payments to creditors it might not be able to afford, according to a Tuesday filing with the U.S. Securities and Exchange Commission.
In the filing, Boxed said that it is working with its financial advisors to identify a buyer for all or most of its assets and “continues to evaluate its options.” The company added that it expects to negotiate a “stalking horse” bid for its assets with a potential buyer. This type of bid, which requires a judge’s approval, sets a floor for a company’s value that other potential bidders would have to top during a bankruptcy auction in order to acquire a company going through bankruptcy.
Boxed sells bulk-sized pantry items online and runs a fresh grocery delivery business in the New York City area in addition to providing e-commerce software to other companies. The firm, which was founded in 2013, went public in late 2021 through a special purpose acquisition company and noted in its first earnings report as a public company that its sales were declining and it was losing money.
According to the requirements of a credit agreement Boxed entered in 2021 and amended in January, the company was obligated to make arrangements to sell at least half of its equity by March 1, Boxed disclosed in a March 6 regulatory filing. But while Boxed provided its lenders with an executed letter of intent from a buyer, the creditors determined that the letter did not satisfy the terms of the agreement, according to the filing, setting in motion the events leading up to the company’s determination that it might have to declare bankruptcy.
News of the possible bankruptcy filing sent Boxed’s stock price down nearly 50% on Wednesday, to just under 22 cents, and then fell even further on Thursday. The company’s shares have lost nearly all of their value since falling below $10 each last May, when they began a sustained, multi-month tailspin.
Boxed faces the possibility of being delisted from the New York Stock Exchange if it cannot bring its stock price back above $1 on average for at least 30 days. The company’s market capitalization is also out of compliance with the exchange’s requirements.
In the Tuesday filing, Boxed said it had entered into retention agreements last Friday with its CEO, CFO and president of e-commerce in order to incentivize those executives to stay with the company while it pursues a potential restructuring, sale or liquidation. Under the agreements, each executive received a lump-sum payment of one-third of their annual base salary under the condition that they remain with Boxed until it reaches one of those outcomes or June 30, whichever comes first.
Boxed also said in the Tuesday filing that it had the majority of its funds on deposit with Silicon Valley Bank at the time the financial institution was seized by federal regulators last week. The company said it was able to move a majority of its cash out of the bank by Monday.
via https://www.aiupnow.com
Sam Silverstein, Khareem Sudlow
