REV - NewAge: Equity Holders Likely To Be Wiped Out In Bankruptcy
Summary
- Former CBD-infused beverages hype NewAge Inc. files for bankruptcy protection after defaulting on its debt earlier this month.
- Company to pursue a sale in a court-supervised auction. Stalking horse bidder has offered a mere $28 million, grossly insufficient to allow for any sort of recovery for equity holders.
- Substantially higher bids would be required to satisfy all creditor claims not to speak of a payout to common shareholders.
- With the business hemorrhaging large amounts of cash, I would be very surprised to see materially higher bids emerge in the upcoming auction process.
- While common shareholders are likely to end up with nothing, I firmly expect the shares to be chased by momentum traders over the next couple of sessions, particularly after what happened to Revlon's stock following the company's bankruptcy filing in June. Given the issues discussed above, NewAge investors should use any major rally to dispose of existing positions.
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NewAge: Equity Holders Likely To Be Wiped Out In Bankruptcy