Danger Zone: 3 Companies That Could Declare Bankruptcy in 2024
Despite a strong economy and stock market rally, 2023 saw its fair share of bankruptcy filings. Notable companies ranging from pharmaceutical chain Rite Aid to former gig economy darling WeWork filed for Chapter 11 protection from their creditors over the past year. There was also the bankruptcy filing of American trucking company Yellow that seemed to catch markets off guard, and the demise of retailer Bed Bath & Beyond.
Stocks of these companies have either stopped trading or are sloshing around on the over-the-counter market. In fact, data from S&P Global Markets shows that there were 591 U.S. corporate bankruptcy filings in 2023, the highest number since 2020 when the Covid-19 pandemic struck. Bankruptcy filings look set to continue well into the New Year. Here is the danger zone: three companies that could declare bankruptcy in 2024.
SunPower (SPWR)
Shares of SunPower (NASDAQ:SPWR) plunged 41% in a single trading session after the solar company issued a “going concern” warning that raised questions about a potential bankruptcy filing. In a regulatory filing, SunPower said that it has breached a credit agreement and could potentially default on a big debt payment. The company has also delayed releasing its third-quarter financial results. “Substantial doubt exists about the company’s ability to continue as a going concern,” said SunPower.
The rooftop solar company is majority owned by French energy giant TotalEnergies SE (NYSE:TTE). Home solar companies such as SunPower have been hurt over the past few years by a slowdown in sales caused by high interest rates, which have made it more prohibitive for consumers to pay for solar panels. There has also been a collapse in clean-energy stocks that’s been exacerbated by rising interest rates. In 2023, SPWR stock has declined 73%.
Canopy Growth (CGC)
The stock of Canopy Growth (NASDAQ:CGC) recently dropped 20% in a day on news that the cannabis producer is executing a one-for-10 reverse stock split to avoid being delisted by the Nasdaq exchange on which it trades. Trading at 52 cents a share, Canopy Growth was not in compliance with the Nasdaq’s requirement that stocks maintain a minimum share price of $1. The new stock price began trading on Dec. 20. The reverse stock split comes as Canopy Growth races towards a Chapter 11 bankruptcy filing.
The bankruptcy rumors have gotten louder since Canopy Growth reported a net loss $324.8 million for its latest quarter. That was greater than the loss of $305.8 million that the company posted a year earlier. Revenue in the quarter totaled only $82 million, down 18% from the previous year. Canopy Growth has already obtained creditor protection for its BioSteel Sports Nutrition business unit, and speculation is swirling that the entire company will file for Chapter 11 within months.
Before the reverse stock split, CGC stock had declined 83% in 2023. Five years ago, the company’s share price was above $60.
Virgin Galactic (SPCE)
Space tourism just hasn’t panned out as hoped. Turns out there’s a limited number of people who can afford to spend more than $100,000 for a trip into low Earth orbit. The lack of demand, coupled with the technical difficulties involved in repeatedly launching humans into space, have conspired to sink the share price of Virgin Galactic (NYSE:SPCE), which has collapsed 95% since June 2021 and is now trading as a penny stock.
The latest blow to Virgin Galactic came in early December with the news that founder Richard Branson has ruled out putting any more money into the struggling space venture. Billionaire Branson said in an interview with The Financial Times that it was time for Virgin Galactic “…to do its job on its own” without any more financial support from him. The company recently announced job cuts and a suspension of commercial space flights until mid-2024 amid speculation that it is burning through cash.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
