It is no surprise that this pandemic has brought down the greatest economies of the world and is still working on bringing down more, but the greatest surprises it has brought for us in 2020 is the bankruptcy that comes hand in hand with the disease. Many businesses are already reporting a fall in the curve in the Q1 of 2020 and this trend doesn't seem to be halting anytime soon.
Hi everyone welcome back!. I have listed down a list of companies which are going out of business due to coronavirus pandemic. Many of these companies were already facing troubles and the pandemic put the final nail in their coffins. If some billionaire investor is reading this they might also be interested in bottom fishing them out. Without spending much time on the intro lets jump right into it!!!
OYO rooms: The first Indian startup to reach decacorn valuation!!! And it so happens that the founder is even from my hometown. I have so much of pity for this company. Due to coronavirus pandemic, their revenue has come down by almost 50-60%. They had reported a loss of $335 million on $951 million in revenue generated globally for the financial year ending March 2019. A soft bank is the largest investor of OYO rooms and with its last year’s bad experience of We Work I wonder if Soft bank is willing to save OYO rooms from its troubled waters. Many hotel owners are striking against OYO rooms and are complaining that OYO didn’t fulfil its promises. A case of a company which grew too fast too soon???
Uber: Another tech company. It went public on May 2019 with 75 billion dollar valuation but failed miserably. After its IPO its stocks are now down by almost 24% and are falling even further. The company had to spend a lot on marketing and branding itself because of its growing number of competitors. The entry barrier to its business model is very less and it faces one local competitor in almost every country it operates. Drivers are striking for more compensation and with payment gateways’ processing fees their profits come down even more. It has already fired 14% of its employees and is signalling that more firings are on the way.
Gold’s gym: With mighty Arnold Schwazeernager as its brand ambassador. Gold's Gym is a premium gym. The cost of this gym membership in India can vary from 18k-25k per year. Amid coronavirus pandemic 800 strong gym chain has also filed for bankruptcy!!! They have permanently closed down 30 corporate-owned locations. They were in losses for 6 consecutive years and the pandemic was probably the final nail in its coffin. After the lockdown is over very few people will actually want to loosen their purse strings to buy the membership of this gym chain.
JCrew: JCrew group operates J Crew and Madewell brands. They are the first national US retailer to file for bankruptcy protection since coronavirus pandemic started. Plans for Madewell to go for IPO is also derailed. . . They had posted sales of about $2billion last financial year but With $1.3billion debt breathing had gone certainly tough for this company. after the pandemic, very few consumers will be likely to buy a luxury brand like J.Crew. JCrew is one of the first companies to file for bankruptcy in the pandemic situation but won't certainly be the last. JCrew is one of the first companies to file for bankruptcy in the pandemic situation but won't certainly be the last many other companies like Sears, hertz, and Pier1 are likely to follow suit for bankruptcy.
GAP: Famous denim brand GAP is running out of cash and has stopped paying its rent. GAP spokesperson said that $1 billion in cash has evaporated from its accounts since February, GAP is implementing furloughs of roughly 80,000 store employees in the US as well as other markets. The stock of GAP has already lost 60% of its value this year. That number is simply huge!!!!
The apparel company, which also has rent to pay for Old Navy and Banana Republic stores, says it's negotiating with landlords to "modify the terms of our leases going forward after the stores reopen." It also said it might close some stores and warned there's "no assurance" it can favourably renegotiate the terms. With a limited amount of online presence and piling unsold inventory, I think they have to give way to younger companies.
Virgin Australia: Most of the world’s airlines could be bankrupt because of COVID19 crisis according to aviation consultant CAPA. Several airlines have already collapsed due to COVID 19 outbreak. The latest news was virgin Australia which declared for chapter 11 bankruptcy on April 21.
But they are continuing operations and have furloughed most of their employees. But I feel that Airlines keep going through these ups and downs and they will bounce back once the coronavirus pandemic is over. People will start buying tickets to travel and they can generate revenue from there. They are the ones who deserve government stimulus the most to keep continuing their operations.
Coronavirus pandemic has wreaked havoc in the business world. And the companies with the strongest of fundamentals are only going to survive this pandemic. I believe these are the 6 billion dollar companies that didn’t have that strong fundamental and there are very fewer chances of them bouncing back from the shutdown!!!
Governments should let these companies fail and they should let other small companies take place of these large companies. The pandemic is almost like a forest fire. It will burn down the tallest of trees and many animals will be killed (a metaphor for employees being fired). But after the fire, many small shrubs and saplings will start taking roots and the cycle of business will start again…
So that’s my 2 cents on the aftermath of coronavirus pandemic. I hope you liked this article. Please let me know in the comment box if you think otherwise.
Happy learning!!!
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