Shares of upscale cinema chain operator iPic Entertainment Inc. tanked on Monday, after the company said it missed an interest payment on a loan and that it may have to file for bankruptcy.
The stock IPIC, -40.90%[1] was last down 42% in heavy volume, with 139,600 shares changing hands, more than 27 times its 65-day average daily volume of just 5,200 shares.
The company, which operates casual restaurants, farm-to-glass full-service bars, and theater auditoriums with in-theater dining at 123 screens in nine states, said in a regulatory filing that it failed to make a $10 million interest payment due July 1 to the Teachers’ Retirement System of Alabama (RSA), the pension fund for teachers in that state.
iPic now has $204 million of debt under a credit facility extended by the pension fund, with which it is in talks. It had hoped to draw on that facility to make the July interest payment, but RSA has not made the funds available. The pension fund has also not declared an event of default—for now. The company has just $2.2 million of cash on hand.
“We do not have adequate cash on hand or other available assets to repay our outstanding indebtedness and RSA could foreclose upon the property that is pledged to secure the credit facility, which property includes substantially all of our assets,” said the filing with the Securities and Exchange Commission.
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“If we are unable to restructure our outstanding indebtedness, including our credit facility with RSA, our significant indebtedness and lack of liquidity will have a material adverse effect on our business, prospects, financial condition, and our ability to continue as a going concern,” it said.
Alliance Global Partners downgraded the stock to neutral from buy on the news and said it would be worthless if the company does go bankrupt.
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“We expect IPIC will need to raise capital at unfavorable terms and as a result, we downgrade IPIC to neutral (from buy) and remove our target until its capital structure becomes more stable,” said analyst Brian Kinstlinger. “Additionally, we are reviewing our estimates given the expected dilution, increased interest expense and potential disruption.”
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iPic went public in February of 2018, raising $15.1 million to fund its expansion. In its most recent quarter, it had a net loss of $9.3 million, or $1.26 a share, for the quarter...