Secoo files for bankruptcy for the second time
In this article (5)
Secoo, once China’s top online luxury goods retailer, has filed a bankruptcy petition for the second time this year, showing how difficult it is for some companies to survive amid waning domestic consumption power in the country.
Beijing Siku Shangmao Co, the corporate entity of the Nasdaq-listed company, filed a bankruptcy case with the First Intermediate People’s Court of Beijing Municipality, according to public records database Tianyancha on Wednesday.
In January, after several domestic media outlets reported that Secoo had filed for bankruptcy in Beijing, the company retracted a petition to wind up, according to a notice on China’s bankruptcy disclosure platform.
Founded in 2008 by Chinese entrepreneur Richard Li Rixue, the retailer quickly gained backing from private equity firms. It grew from a second-hand handbag shop into China’s largest luxury goods exchange for individuals, with a 2017 initial public offering on Nasdaq raising US$140 million.
Its stock fell to US$0.27 in New York trading on Wednesday, compared to a high of US$14.6 four years ago. Since late last year, Secoo’s shares have been trading below US$1.
On December 17, 2021, the firm received a delisting warning after its closing bid price for 30 consecutive business days fell below US$1 per share, Nasdaq’s minimum bid price requirement.
Under an initial 180-day grace period, which ended on June 15, Nasdaq said the company would be officially delisted if its closing bid price was not above US$1 per share for at least 10 consecutive business days.
On June 17, the company said Nasdaq had granted it a second 180-day grace period, until December 12, 2022, to comply with the minimum bid price requirement.
Analysts attributed the company’s problems to several factors. While it caught the early wave of luxury e-commerce business in China, it also made several business decisions that deviated from its original mission.
For example, it invested heavily in live streaming, with a 7,000-square-metre facility and dedicated team, and also vowed to disrupt the luxury resale sector with a blockchain-empowered authentication service.
Adding to Secoo’s internal missteps, demand for luxury goods has softened, with China’s total national retail sales only rising 3.1 per cent year on year in June.
Questions & Answers
Q.What led to Secoo's significant drop in stock value on Nasdaq?
What led to Secoo's significant drop in stock value on Nasdaq?
A.
Secoo's stock price plummeted from a high of US$14.6 four years ago to US$0.27 on Wednesday. This fall led to a delisting warning from Nasdaq after its bid price consistently stayed below the US$1 minimum requirement for 30 consecutive business days.
Q.What efforts did Secoo make to avoid delisting from Nasdaq?
What efforts did Secoo make to avoid delisting from Nasdaq?
A.
After receiving a delisting warning, Secoo was granted an initial 180-day grace period, which expired on June 15. The company then secured a second 180-day grace period from Nasdaq, extending its deadline to comply with the minimum bid price requirement until December 12, 2022.
Q.What business decisions contributed to Secoo's struggles, beyond the economic environment?
What business decisions contributed to Secoo's struggles, beyond the economic environment?
A.
Analysts suggest Secoo made several internal missteps. These included significant investment in live streaming, with a large facility and team, and attempts to disrupt the luxury resale market with a blockchain-powered authentication service, which deviated from its original mission.
Q.When did Secoo originally go public and how much capital did it raise?
When did Secoo originally go public and how much capital did it raise?
A.
Secoo had its initial public offering on Nasdaq in 2017. The company successfully raised US$140 million through this IPO, marking a marker in its growth from a second-hand handbag shop.
Reader pulse
What's the main takeaway from Secoo's news?
18,941 votes so far