boxed bankrupcy

Boxed, the grocery e-commerce company that went public in 2021 through a SPAC (special purpose acquisition company) reverse merger in December 2021 has filed for bankruptcy and joined the long list of de-SPACs that have gone bankrupt.

Boxed would also explore the sale of Spresso – its Software-as-a-Service business and shut its retail business shortly.

The company’s co-founder and CEO Chieh Huang said in his statement that “This was an incredibly difficult decision, and one that we reached only after carefully evaluating and exhausting all available options.”

Like many fellow de-SPACs, Boxed was also starved for funds and in January it announced $20 million in additional funding. It reported cash and cash equivalents of $39.4 million at the end of September and hasn’t reported its Q4 2022 earnings yet.

Boxed merged with Seven Oaks Acquisition Corp in December and raised $198 million from the transaction of which $120 million was from PIPE (private investment in public equity) and the remaining $78 million from SPAC trust.

Like most SPAC mergers of that time, there were large-scale redemptions in Boxed also and the company was expecting $259 million from the SPAC trust.

The redemptions levels in SPACs rose to an average of 89% last year – which was almost twice the previous year.

Boxed Files for Bankruptcy amid Cash Woes

While Boxed worked on additional funding and also lowered its cash burn rate – they were not enough and the company eventually headed for bankruptcy.

Many fellow de-SPACs are also facing terrible cash crunch and recently Sir Richard Branson’s Virgin Orbit halted operations after it failed to secure funding.

Last month autonomous truck startup Embark which went public in 2021 said that it is exploring liquidation and asset sales as strategic alternatives.

Over half a dozen companies that went public through SPAC reverse merger including Enjoy Technology, Starry Group Holdings Inc, and Quanergy Systems Inc have filed for bankruptcy.

The performance of de-SPACs was terrible last year and the AXS de-SPAC ETF lost around three-fourths of its value in 2022.

De-SPACs Crashed in 2022

The ETF has since liquidated, which reflects the trouble that de-SPACs have faced over the last year.

Companies that went public through traditional IPOs fared no better and the Renaissance IPO ETF, which invests in a portfolio of newly-listed companies and is overweight in the tech sector, fell 57% in 2022.

Most SPACs priced the IPO at $10. However, given the massive crash, many are now trading below the minimum exchange listing threshold of $1. Many companies like Paysafe went for a reverse stock split to meet the minimum listing requirements.

Many others like Spire and Momentus have received listing warnings for non-compliance with minimum listing requirements.

A lot of SPACs went public at exorbitant valuations. As the Fed pulled the plug on cheap money, investors shunned loss-making companies, which was the case with almost all the de-SPACs.

Boxed Market Cap Has Plummeted

Far from the market euphoria of 2020 and 2021, most SPACs are now staring at an uncertain future and face risks of bankruptcy as well as delisting.

The fortunes of these shell companies are best reflected in the dwindling IPO count. In 2022, there were 86 SPAC IPO, which is not even 15% of 2021. We are almost three months into 2023 and there have been just 9 IPOs so far in 2023.

The market caps of de-SPACs have also plummeted and Boxed now has a market cap of around $14 million – a fraction of the over $1 billion market cap that it had at the peak.

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