A covid company now files an unexpected bankruptcy after failing in its efforts to cut staff and other expenses in order to survive.
Cue Health once had a market capitalization of as much as $2.3 billion.
However, demand for Covid testing has dropped significantly.
It once seemed like being able to test for Covid reliably in the workplace would be a growth industry.
However, that system proved to only be a temporary trend.
Now that the impact of the pandemic has faded, most companies have woken up to how their rights were unconstitutionally stripped from them as they were forced to close.
“There was a long period in 2020 where restaurants and retail chains like Walmart, Amazon, and Target required health checks before workers could do their jobs.
That has gone away because it’s time-consuming, sometimes leads to actually sending needed workers home, and testing has political overtones that many companies want to avoid,” reports TheStreet.
Cue Health has now filed for Chapter 7 bankruptcy, laid off all of its workers, and will be liquidated, per filings.
For a while, things looked great.
Cue had contracts with the NBA, Major League Baseball and the Department of Defense.
But the pandemic faded.
By early 2023, despite efforts to find new markets for its products, the shares had fallen 97% from Cue’s IPO price.
Revenue was down 97%, too.
Through 2023 and into this year, Cue unsuccessfully tried to shore up operations, get new products to market, and find new capital.
In May, however, the FDA advised customers not to use two of its products at all because they did not deliver accurate results.
Finally, its board and executives threw in the towel.
On May 28, the company announced it was ceasing operations and filed for bankruptcy in Delaware’s U.S. Bankruptcy Court.
The company’s assets will be sold off at an undetermined date, and the proceeds will be distributed to creditors.
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Other Economy News Today
An essential company now files a surprising bankruptcy after miscalculating demand for its inventory after the Covid-19 pandemic.
Supply Source Enterprises, a leading provider of branded and private label cleaning products and personal protective equipment, on May 21 filed for Chapter 11 protection to seek a sale of its assets.
Supply Source brands include The Safety Zone and Impact Products.
The Guilford, Connecticut debtor listed $50 million to $100 million in assets in its petition and $180 million in funded debt, which includes $80 million owed on a term loan credit facility, $60 million owed on an asset-based loan, and about $40 million in unsecured debt.
Before the Covid-19 pandemic, which generated huge demand for cleaning supplies and personal protective equipment in 2020, Supply Source had been consistently profitable with stable single-digit growth, according to a declaration from the debtor’s Chief Restructuring Officer Thomas Studebaker.
Once the pandemic hit in 2020, the debtor had substantial growth due to high demand for safety, hygiene and sanitation products
The debtor reported adjusted Ebitda of $93 million in 2020 which was nearly a 300% increase over the previous year.
However, the company’s financial performance deteriorated in subsequent years.
Based on the unprecedented demand in 2020, the company commissioned an industry study in early 2021 that concluded that the Covid-19 pandemic would fundamentally change the cleaning supplies and protective equipment industry and market for its products.
The study also estimated that the company’s Covid-related growth would likely be sustained through 2024.
In contemplation of continued customer demand at elevated prices, based on the study’s data, the debtor increased purchases of inventory even though the costs were higher due to supply chain constraints during the pandemic.
Despite the study’s assurance that growth would be sustained for years, the pandemic’s positive effect on the market faded by the end of 2021 and demand for PPE decreased to normal rates, reports TheStreet.
The reduction in demand led to large amounts of excess inventory that the company could not sell in the same quantities and prices.
The excess inventory forced the debtor to secure additional storage space, which increased storage costs.
These factors tightened the company’s liquidity and led to a decline in annual revenue in 2023 by 26% from 2022, resulting in a negative 2023 Ebitda of $13 million.
The debtor’s liquidity issues led to it being overdrawn on its asset-based loan facility by $30 million.
The ABL lender in February 2024 swept the debtor’s bank accounts, further impacting the company’s financial distress.
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Also Read: This Massive Mall Retailer Is Now Closing In California
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