What happened
Tattooed Chef (TTCF 100.00%) investors had a rough go of it this week. The plant-based packaged food specialist's stock was down 47% through Thursday trading compared to a 0.9% drop in the S&P 500. The slump added to a difficult year for shareholders, who are down nearly 80% so far in 2023 compared to a 15% uptick in the wider market.
This week's decline came after the company announced plans to file for bankruptcy protection.
So what
In a press release over the weekend, Tattooed Chef revealed that it is filing for Chapter 11 bankruptcy due to ongoing pressures on the business. "Despite [our colleagues'] commitment to our mission and our best efforts to maintain the operations," CEO Sam Galletti said, "our business has continued to be impacted by a challenging financing environment and an inability to raise additional capital."
The news wasn't a huge surprise. Tattooed Chef's stock had been under extreme pressure in recent months as operating trends turned negative. Sales fell 13% in the fiscal first quarter, for example, and the company booked gross losses and net losses as well.
Management attempted to pivot toward aggressive cost reductions, but that effort apparently wasn't successful at getting cash flow trends back to where they needed to be absent outside financing.
Now what
It's not clear exactly in what form Tattooed Chef will emerge after the bankruptcy process. The food company is looking to sell off the business to creditors in a bidding process, though, and is aiming to maximize the price it gets for those assets.
Stock investors will likely receive very little or nothing from that process, which helps explain why the company's market cap is below $50 million today. There's little reason to consider that valuation a deal right now given Tattooed Chef's progression toward full bankruptcy.