“That said, staying listed and a share consolidation or some form of restructuring the business is the outcome we would expect to see.”
Allbirds could reach compliance simply by halving its shares in a 2:1 consolidation (for a US$1.28 share price, based on recent trades).
A firm must stay above a minimum market cap as it consolidates its shares, but the threshold is a modest US$1 million. Although more than 90 per cent off its high, Allbirds’ market cap at around US$99m is still well above that minimum.
“It’s not a good position for the company at all,” Gordon said.
“It shows the challenges for running any business in a listed setting - especially in the US. It’s not good for Tim [Allbirds Kiwi founder Tim Brown, a former All Whites captain] and all shareholders. It will be hard work.”
Gordon and Clare Capital principal Mark Clare both hold Allbirds shares personally.
Shares continue to slump
Allbirds shares which opened at US64c, sank to US63c on the news.
Allbirds listed on the Nasdaq in November 2021 at US$15.00 per share.
Its shares rose 91 per cent to US$28.64 by the close of its first day of trading - valuing the firm at just under US$4 billion and Brown’s minority stake at US$459m ($650m).
But a series of disappointing quarters during the pandemic, compounded by the Wall Street Journal raising durability issues and claiming Allbirds had lost its brand cachet, saw its stock hammered.
Leadership cleanout
Faced with mounting losses and reversing revenue, Allbirds has replaced nearly all of its executive team over the past year with figures from more traditional firms.
Brown, who started Allbirds from an apartment in Wellington’s Cuba St, stepped down as co-chief executive in May last year as the firm’s challenges mounted, leaving Joey Zwillinger in sole charge at the top.
In March, Zwillinger was replaced as CEO by Joe Vernachio, a former global operations head for The North Face (Zwillinger, like Brown, remains on the board).
In January, Allbirds named chief marketing officer Kelly Olmstead (formerly brand activation VP for Adidas) and a new chief design officer, Adrian Nyman, formerly Nike’s creative director for global retail.
Losses mount
On March 13, Allbirds reported a fourth-quarter net loss of US$56.8 million, taking its full-year net loss to US$152.5m - compared to the prior year’s US$101.4m in red ink.
Fourth quarter revenue fell 14.5 per cent to US$72m, while full-year revenue was down 14.7 per cent to US$254m.
The firm forecast an even tougher year ahead. A restructure under way involves store closures (not including the firm’s Auckland shop) and a new distributor-based model to replace direct sales.
Allbirds responds
In an emailed statement to the Herald, Allbirds said its stock would continue to trade on the Nasdaq, “with 180 calendar days to regain compliance with the minimum bid price requirement; there is potential for an additional 180-day period beyond that. In the meantime, we continue to operate the business with a sharp focus on executing our strategic transformation plan.”
The firm added, “Over the past year, under our plan, we significantly improved our business model – cleaned up inventory, captured cost savings, reduced our operating cash use, and signed agreements with international distributors – providing the runway and financial flexibility to continue to execute on our plan and position the company to drive profitable growth in future years.”
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
