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diving letter:
- According to a securities filing, Enjoy Technology filed a petition for Chapter 11 bankruptcy protection in Delaware federal court on Thursday.
- The commerce-at-home company said it intends to continue operations during the process and plans to sell itself to the highest bidder in bankruptcy. It has also attempted to shut down its UK operations.
- To fund it through the process, Enjoy has a $55 million bankruptcy funding commitment from Asurion, a Nashville company that provides insurance for electronics and other consumer products. The commitment includes a stipulation that Asurion will be the stalking horse bidder in a bankruptcy auction.
Dive insight:
Enjoy Technology experienced a rapid turnaround when supply chain problems and a liquidity crisis forced the company to restructure.
Enjoy was founded in 2015 by Ron Johnson, who previously ran Apple’s retail division and JC Penney department store. Its core service is the mobile store, bringing warehouse and retail sellers right to customers’ doorsteps.
Enjoy went public last year through a merger with a special purpose vehicle (SPAC) and almost immediately underperformed and encountered difficulties with its expansion plans.
Enjoy had ambitions to expand deeper into electronics and had recently launched its “Smart Last Mile” service, which aims to combine a personal retail experience with door-to-door delivery. The company has also said there could be opportunities in other categories like home fitness, beauty and luxury apparel.
But the company’s liquidity crisis threw cold water on its plans. Much of the trouble was due to a tight supply of Apple’s latest iPhone products in the second half of 2021. That resulted in quarterly sales that fell short of analysts’ estimates.
The company had also increased its staff and warehouse presence in anticipation of a massive expansion into 100 new markets. But the loss of revenue caused the company’s losses to widen and cash burn to increase.
That year saw the departure of two chief financial officers within two months, and revelations that the company might not survive as a going concern, might have to file for bankruptcy and had only enough cash to last through June. Earlier this week, Enjoy announced it was planning to suspend its commerce-at-home services for Apple and was facing a possible delisting from the Nasdaq less than a year after going public.
Now it’s bankrupt and wants to sell itself. Asurion, which is also providing Enjoy with a $2.5 million bridge loan to get through the first week of July, would be well positioned to acquire the company if its DIP funding package is approved. Its commitment to provide a DIP loan is tied to a stalking horse bid on Enjoy, which would form the basis of a Chapter 11 auction.
The DIP funding, stalking horse bid and auction process are subject to bankruptcy court approval.
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