Dive Brief:
- Enjoy Technology filed a petition for Chapter 11 bankruptcy protection in Delaware federal court on Thursday, according to a securities filing.
- The “commerce-at-home" company said it aims to keep operating through the process and plans to sell itself in bankruptcy to the highest bidder. It has also moved to wind down its U.K. operations.
- To fund it through the process, Enjoy has a $55 million bankruptcy financing commitment from Asurion, a Nashville company that provides insurance for electronics and other consumer products. The commitment includes a provision that Asurion will be the stalking horse bidder in a bankruptcy auction.
Dive Insight:
Enjoy Technology has experienced a swift change of fortunes as supply chain issues and a cash crunch forced it into a restructuring.
Founded by Ron Johnson, who in the past has led Apple’s retail division and the department store J.C. Penney, Enjoy launched in 2015. Its core service is the mobile store, which brings inventory and retail salespeople to customers’ doorsteps.
Enjoy went public last year through a merger with a special purpose acquisition company, or SPAC, and almost immediately began falling short of expectations and running into snags with its expansion plans.
Enjoy had ambitions to expand deeper into electronics and had recently launched its “Smart Last Mile” service, meant to combine an in-person retail experience with door-to-door delivery. The company has also said there could be opportunities for it in other categories, such as home fitness, beauty and luxury apparel.
But the company’s cash crunch threw cold water on its plans. Much of the trouble stemmed from a short supply of Apple’s latest iPhone products in the back half of 2021. That led to quarterly sales that fell short of analyst estimates.
The company had also beefed up its staffing and warehouse footprint in anticipation of a massive expansion into 100 new markets. But the revenue shortfalls meant that the company’s losses expanded and cash burn increased.
This year brought the departure of two chief financial officers within two months, as well as disclosures that the company might not survive as a going concern, might have to file for bankruptcy and only had enough cash the get it through June. Earlier this week, Enjoy disclosed that it planned to pause its commerce-at-home services for Apple and was facing potential delisting from Nasdaq, less than a year after going public.
Now it is in bankruptcy, looking to sell itself. Asurion, which is also providing a $2.5 million bridge loan to Enjoy to get through the first week of July, would be well-positioned to take over the company if its DIP financing package is approved. Its commitment to provide a DIP loan is tied to a stalking horse bid for Enjoy, which would set the baseline for a Chapter 11 auction.
The DIP financing, stalking horse bid and auction procedures will require approval from the bankruptcy court.
