Boxed Bankruptcy Shows Cracks in Pandemic’s SPAC Funding Frenzy

It seems like a lifetime ago — SPACs were the “it” way to take companies public.

And during the pandemic, eCommerce delivery businesses were the “it” business model.

The disruptors, sometimes, get disrupted.

The latest reminder came over the weekend when Boxed, the online grocery retailer, filed for Chapter 11 and said it would wind down operations. The pressures are apparent in that it had $102 million in assets, outpaced by the $190.4 million in liabilities.

Last trading at about 18 cents a share, the company’s descent starkly contrasts with a trading history that began at the end of 2021 amid the pandemic, where the shares peaked at more than $13.

Winding Things Down

The SEC filing detailing the Chapter 11 process and the wind-down shows that the “company continues to accept orders through its Union, New Jersey fulfillment center for its remaining inventory.” And at this writing, the firm has said that in its “Bigger is Better” sale, consumers can save up to 60% on their purchases.

The Chapter 11 filing did not come out of the blue, as Boxed had said last month that it was negotiating with its lenders and exploring a sale of the business. In addition, the turmoil of the Silicon Valley Bank collapse hit close to home — Boxed had had most of its cash at the failed bank but managed to move those funds. Tracing Boxed’s woes to SVB would be misguided, we contend, given that, as widely reported, the deposits would have been backstopped by the FDIC.

Boxed’s problems ran deeper. As evidenced in the company’s most recent results, Boxed offered bulk delivery of groceries and other items to customers (households and businesses) and also sold software to retail clients. But overall sales in the third quarter were off 15% to $41.7 million as retail active customers slipped to 124,000 from 157,000 in 2021 (though retail sales were up nearly 9%). Any gains were heavily offset by the software and services revenue declines, which plummeted from $10.8 million in the third quarter of 2021 to around $73,000 in the most recent period.

The net loss widened year on year to $26.4 million from $5.9 million last year.

The triple-digit gains that had been a hallmark for delivery firms back when Boxed.com had announced its merger with special purpose acquisition company (SPAC) Seven Oaks Acquisition Corp. did not materialize, and single-digit percentage point gains in revenues were not enough to staunch the cash burn.

PYMNTS’ own research has shown that digital-only grocery shopping has become more popular, but penetration is still relatively low. The “digital-only” grocery shopper has skyrocketed from just 0.2% before the pandemic to 7.2%. But the space was and still is crowded (and bulk players like Costco and Walmart have gained significant ground). Elsewhere 

PYMNTS has found that 4 in 10 shoppers can still be lured to brick-and-mortar locations by convenience and ease, and deal seekers in an inflationary environment have sought out on-premise purchases.

As for the SPAC mania? 

Well, that’s become a well-documented bust, where two years ago the number of SPAC listings topped 600 overall; that tally has now become anemic, especially in commerce and FinTech. PYMNTS reported at the end of last year that, depending on the vertical, listings were in the single digits. The preferred way of coming to market — at least during the pandemic — now seems more like a relic of yesteryear.