SHANGHAI— Despite recent bankruptcy filings, Chinese luxury retailer Secoo has revealed it has found two new investors.
The Nasdaq-listed company on Aug. 19 reached share purchase agreements with local private equity firms Beijing HCYK Corporation Management Partner and Timing Capital Limited.
HCYK will buy 3.75 million Class A common shares worth $3 million, while Timing Capital will buy 1.25 million Class A common shares worth $1 million. The transaction is subject to customary closing conditions, such as HCYK obtaining government approvals in China for overseas direct investment.
“This large injection will provide Secoo with the capital needed to implement our robust growth initiatives,” Rixue Li, the company’s founder, chairman and chief executive, said in a statement. “We are excited to welcome new investors to be part of our next phase growth story.”
Plagued by prolonged COVID-19-related shutdowns, a slowing economy, and fierce competition from local players such as Tmall and JD.com, Secoo has filed for bankruptcy with the municipality’s First Intermediate People’s Court. from Beijing earlier this month. The company first filed for bankruptcy last January, but later withdrew the petition.
“A so-called investment is actually a delay in paying one’s debts,” said Ting Zhou, dean of the Yaok Institute, a luxury research and consulting organization in China. “This company can be seen on the verge of collapse, just before going through legal procedures.”
The company posted a net loss of 566 million renminbi, or $83.8 million, last year, a 547% increase from 2020. Revenue fell nearly 50% to 3.13 billion renminbi, or $434 million. The company’s shares are currently trading at 30 cents apiece, a fraction of their high of $14.46 in 2018, a year after its IPO.
Secoo received a delisting warning in December 2021 after its shares fell below $1 for 30 consecutive days. In January this year, the company revealed its intention to delist.
According to Tianyancha, China’s leading business data search platform, Secoo has been mired in more than 500 sales contract disputes. Earlier this month, Secoo lost a lawsuit against its first partner Prada, in which the Italian luxury brand sought to freeze more than 11 million renminbi, or $1.63 million, of the retailer’s assets. luxury online due to a contractual dispute.
Secoo still operates 12 physical stores in China in first- to third-tier cities, according to the company’s WeChat Mini program.
According to a former employee, the Shanghai store was closed in April. “The company said it was closed due to the pandemic, and they paid me 120,000 renminbi as severance pay,” the former employee said.
According to local media, Secoo’s headquarters in Beijing was almost empty last week. Security staff said employees started moving six months ago and only some were still using the fifth floor. An offline experience center on the first floor was also vacant.
Secoo later told local media that the information was false and “several hundred people are still working on it”.