The clock is ticking to avoid delisting on NYSE
By: Dave Rauf
“The Company intends to develop and submit this business plan within the required timeframe, and to identify measures that are in the best interests of the Company and its stockholders.” – Tupperware
Tupperware is at risk of getting delisted by the New York Stock Exchange (NYSE) for noncompliance, following the direct-selling giant disclosing in April that it might go bankrupt.
The latest in a growing list of issues for the maker of food storage containers and kitchen goods is the result of its average global market capitalization being less than $50 million over a 30-trading-day period. Also, its stockholders’ equity was less than $50 million when last reported, according to a regulatory filing.
SEC Sets Deadline
In the Securities and Exchange Commission (SEC) filing, Tupperware says it received notice from regulators on June 1 that it has 45 days to submit a business plan to the NYSE to remedy the issue. That plan, according to the filing, must present “definitive action the Company has taken, or is taking, which would bring the Company into compliance with the minimum global market capitalization listing standard.”
Tupperware stated, “The Company intends to develop and submit this business plan within the required timeframe, and to identify measures that are in the best interests of the Company and its stockholders.”
Another issue at hand: Tupperware’s average closing stock price was less than $1.00 over 30 consecutive trading days. It now has six months to fix that issue by having a closing share price of $1.00 on the last day of the month and an average stock price of $1.00 through the prior 30-day trading period.
Tupperware’s stock price remained under $1.00 as of June 16, trading at around $0.91 at close. In the filing, Tupperware says the NYSE’s latest notice “has no immediate effect on the listing of the Company’s common stock.”
The June 1 noncompliance notification to Tupperware was the second from the NYSE in three months, amid concerns from company executives that it could go out of business without an infusion of additional money.
In April, the NYSE said Tupperware could be delisted after the company did not file an annual report. Tupperware had said that it expected to file its report with the SEC within 30 days, but never did. Now, the company says it expects to file that annual report by mid-July, along with a first-quarter earnings report for 2023 by early September, according to the SEC filing.
If Tupperware gets delisted from the NYSE for any of its pending noncompliance issues, the company’s stock will begin to be traded as a penny stock on the over-the-counter-market.
The company’s string of noncompliance issues with the NYSE comes as it braces to survive. Earlier this year, Tupperware warned it could be going out of business.
In an April filing with the SEC, Tupperware said “there is substantial doubt about the company’s ability to continue as a going concern due to anticipated non-compliance with financial covenants and inadequate liquidity to fund its operating costs and obligations in the near term.”
At the time, the company said that it could violate the obligations made in its credit agreement and that it needed more cash flow.
Financing Discussed, Restructuring Officer Appointed
Following the announcement, Tupperware shared in a press release that it had discussed financing options with advisers to see if there is a way forward without losing the business. The company is hunting for additional funding and is reviewing different aspects of its business, ranging from its real estate portfolio to possible layoffs.
The company also appointed Brian Fox, a managing director with Alvarez & Marsal’s North American Commercial Restructuring practice in New York, as its chief restructuring officer, according to a Securities and Exchange Commission document.
“Tupperware has embarked on a journey to turn around our operations, and today marks a critical step in addressing our capital and liquidity position,” CEO Miguel Fernandez said in a statement when the company disclosed its financial troubles in April. “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.”
Aside from ongoing financial turbulence, Tupperware’s investors have filed a class action lawsuit, claiming the legacy party-plan brand didn’t “disclose its serious issues with internal controls.” The suit also claims Tupperware included material “misstatements” in its 2020 financial reporting.
The company sells products in over 70 countries through its independent sales force, and last year retail giant Target started carrying its products. After years of declining sales, Tupperware had seemingly appeared to be turning a corner.
The company had been able to take advantage of growing customer needs to cook and store food at home during the COVID-19 pandemic. Tupperware saw a sales jump from growing eat-at-home trends and increased concerns from consumers about food safety and storage.
Turnaround Plan Faces Challenges
In 2020, the company launched an ambitious three-year turnaround plan, which included an executive shake-up aimed at rejuvenating its beleaguered brand after years of revenue declines and falling stock prices. That same year, Tupperware reported its first year-over-year sales increase in a quarter since 2017, and the company’s stock rallied at the time in response.
“We believe the changes we’ve made and the results we’ve reported are evidence that a great turnaround story is in the making,” Fernandez told analysts during a 2020 earnings call announcing year-over-year quarterly growth. “Our leadership team, along with the support of our board, is now implementing a new growth strategy for the company.”
He added: “While it’s still very early days in the complete turnaround of this company, the confidence of our leadership team grows stronger every day that we’re making the right changes at the right speed with the right focus.”
But Tupperware has faced additional challenges in recent financial quarters, as pandemic trends bolstering their sales have softened: More people have returned to restaurants and eating outside the home again.
In 2022, sales dropped by 18% to $1.3 billion compared to 2021, and the company’s stock price has plummeted 86% since last June.
Company at Crossroads
In the wake of Tupperware’s recent financial challenges and the looming threat of delisting from the NYSE, the company finds itself at a critical juncture. As shareholders and analysts closely monitor the situation, Tupperware’s leadership faces the imperative of implementing robust strategies to regain stability and investor confidence. Only time will reveal the company’s ability to navigate these troubled waters and restore its standing in the market.
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