Tupperware Stock Crashes, Company May Shut Down

Tupperware products are seen on the shelves at a Target store in San Bruno, Calif., on June 19, 2003. (Photo by Justin Sullivan/Getty Images)

Iconic kitchen brand Tupperware could wind up operations anytime as the company tries to resolve a liquidity crunch, sending shares crashing.

Tupperware has determined that “a violation of its credit agreement covenants is probable to occur as a result of forecasted non-compliance with financial covenants and the company’s delay in filing its Form 10-K, as well as cash constraints caused by higher interest costs and timing of re-engineering actions,” according to an April 3 regulatory filing with the U.S. Securities and Exchange Commission (SEC).

“Further, due to the challenging internal and external business economics causing volatility in the company’s earnings, coupled with the increased levels and cost of borrowings under its credit agreement, the company currently forecasts that it may not have adequate liquidity in the near term.”

“The company has therefore concluded that there is substantial doubt about its ability to continue as a going concern,” it said.

Shares of Tupperware crashed following the revelation. On April 6, Tupperware closed at $2.42, with a volume above 718,000. On April 10, share prices fell to $1.24, a decline of nearly 50 percent, with volume exceeding 19 million.

The company’s director board has engaged with financial advisors to secure supplemental investors so as to improve its liquidity situation. It is also talking with potential investors or financing partners.

“The company is doing everything in its power to mitigate the impacts of recent events, and we are taking immediate action to seek additional financing and address our financial position,” said Miguel Fernandez, chief executive of Tupperware Brands, according to a press release on April 7.

Resolving Liquidity Issues

To resolve its liquidity position, the company is mulling various plans. It could issue equity securities through the sale of the company’s common stock.

If this were to happen, “it is highly likely that existing stockholders will be diluted,” Tupperware said in the filing. Any issued equity shares may also offer rights, privileges, and preferences that give such holders seniority to the holders of common stock.

In case the company raises funds through the issue of additional debt securities, these securities “will likely” have rights, preferences, and privileges over stockholders.

Tupperware is also reviewing its portfolio of real estate for “potential dispositions or sale-leaseback transactions.”

The company is exploring right-sizing, cash management, fixed-asset monetization, as well as marketing and channel optimization in a bid to deliver additional liquidity this calendar year. However, Tupperware admitted that there is “no assurance of the timing or outcome of these actions.”

“If the company is unable to obtain adequate capital resources or amendments to its credit agreement, management anticipates that it will have inadequate liquidity to fund its operations and satisfy its obligations as currently anticipated in the near term pursuant to its current business plan,” the filing said.

NYSE Delisting

Tupperware has around three million independent sales members in almost 70 countries. Unlike the 1950s when the brand was first introduced, people now have far more options in food storage, which puts the company’s prospects in a tough spot.

On April 3, the NYSE sent a notice to Tupperware, warning that it is non-compliant with the exchange’s rules due to its failure to file Form 10-K on time.

The exchange has six months to regain compliance by filing Form 10-K with the SEC, failing which the NYSE might initiate delisting proceedings.

“The company currently expects to file its Form 10-K with the SEC within the next 30 days; however, there can be no assurance that the Form 10-K will be filed at such time,” said the press release.