The past week was relatively quiet for IPOs. Most notable, however, was, Spotify Technology SA's (NYSE: SPOT) unique direct listing, which resulted in first-day stock appreciation. The previously detailed direct listing by the Stockholm-based music-streaming company was the largest of its kind and might pave the way for other firms looking to enter public markets through the non-traditional route.
During the past year, many notable U.S. retailers have been significantly derailed by the consumer spending shift to e-commerce and their heavy debt burdens. Since the start of 2018, Toys-R-Us, iHeartMedia, and Claire's have all filed for bankruptcy. During the past two weeks, two more recognizable companies have filed bankruptcies: Remington Outdoor Co. and Nine West Holdings, Inc.
A firm or its creditors can undertake two separate avenues within Title 11 of the United States Code (Bankruptcy Code) when a business is unable to service its debts or pay back creditors. The first choice is Chapter 7, whereby, the courts will assign a firm a trustee, who will examine the financial affairs and administer the appropriate liquidation processes. During liquidation, daily operations have ceased, and the firm's assets, including whole business units, and property will be dissolved and re-distributed to the creditors, starting with the secured creditors. The second choice for bankruptcy is Chapter 11, in which any business can file for re-organization. After filing for Chapter 11 bankruptcy, the debtor in possession continues to operate the business and has 60 days to submit a written disclosure detailing its assets, liabilities, and business affairs. Then, a 120-day period of exclusivity offers the debtor in possession the first opportunity to draft a business restructuring plan. Once a reorganization plan is established, the creditors will vote on the plan while the presiding judge deliberates. Failure to construct an approved restructuring plan or secure interim financing during the bankruptcy phase can lead to case dismissal and subsequent liquidation processes.