The Boxed Inc (NYSE: BOXD) stock price crashed 49% after revealing that it held all its funds in Silicon Valley Bank (SVB) accounts and that its corporate credit cards were also maintained via SVB. The company also revealed that it had yet to sign an agreement with potential lenders and was at risk of filing for bankruptcy.
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Investors’ adverse reaction to the filing was justified given that despite being in a challenging financial position, the company had offered its CEO, CFO and head of eCommerce a retention agreement with a lump sum payment worth 33.33% of each individual’s annual base salary, less applicable tax withholdings and deductions.
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The online and mobile wholesale retailer that doe snot charge a membership fee justified the lumpsum payments to its top executives saying that they were meant to motivate them to stay with the company up to June 30, 2023, or until when the firm signs a definitive restructuring agreement of files for bankruptcy.
Boxed noted that it could not implement the Forbearance Agreement signed between it and its lenders since it could not prepay the $5 million stipulated in the agreement and had yet to deliver a debtor-in-possession budget acceptable to the Lenders.
However, the company noted that it had changed its operations significantly, including reducing its headcount, streamlining its operations and implementing cash management strategies. The company revealed that it was actively seeking proposals to sell all or some of its assets to improve its liquidity position.
Boxed also revealed that it would be quick to file for bankruptcy if its financial condition deteriorated since it was open to a court-supervised restructuring process. The company has also delayed filing the financial results for the financial year ending December 2022.
The firm plans to file a Form 12b-25, Notice of Late Filing report, with the SEC seeking more time to file the report. Still, the company may enter bankruptcy proceedings before filing its annual report, given the challenging environment it is currently facing.
I would steer clear of Boxed shares, given that the firm is teetering on the edge of bankruptcy.
*This is not investment advice.
Boxed stock price.
The Boxed stock price plunged 49.04% to trade at $0.2166, from Tuesday’s closing price of $0.425.
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