Despite Bruce Galloway's Pushback On Bankruptcy, WeightWatchers Enters Chapter 11; Says Members Won't Be Affected
Once a dominant force in the weight-loss industry, WW International Inc. (NASDAQ:WW), formerly known as WeightWatchers, is feeling pressure from the disruptive rise of anti-obesity drugs, and is now staring at a bankruptcy process to reorganize its finances.
What Happened: In a press release on Tuesday, the company announced that it has voluntarily initiated a "pre-packaged" Chapter 11 bankruptcy filing in Delaware. It aims to complete the court-supervised reorganization process within 45 days, “if not sooner.”
It plans to eliminate $1.15 billion in debt on its books through this process, helping “position WeightWatchers for long-term growth and success,” as it transitions into a telehealth services provider.
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The company says that it will remain fully operational during this reorganization process, and that there will be no impact on its members or the plans they rely on.
WW International’s CEO, Tara Comonte, says, “The decisive actions we're taking today, with the overwhelming support of our lenders and noteholders, will give us the flexibility to accelerate innovation, reinvest in our members, and lead with authority in a rapidly evolving weight management landscape.”
Once backed by talk show host Oprah Winfrey, it has been under increasing pressure in recent years amid the rising popularity of GLP-1 drugs like Wegovy and Ozempic, manufactured by Novo Nordisk A/S (NYSE:NVO), which many consumers see as a more convenient alternative to counting points and calories, according to a report by CNN.
Why It Matters: The move to file for bankruptcy comes amid investor Bruce Galloway building a 3% stake in the company two weeks ago, before urging the management not to file for bankruptcy, in a letter addressed to Comonte.
“We believe [that] if the company files Chapter 11, this will significantly impair the shareholders and be an extreme breach of the Board and Management's fiduciary duty and responsibility,” he said, before suggesting that the company pursue an out-of-court restructuring by offering equity to debt holders, citing the recent example of Regis Corp. (NASDAQ:RGS).
The company has made several efforts over the years to stay relevant in this rapidly changing weight-loss landscape, with the most prominent one being its acquisition of telehealth provider, Sequence, which can prescribe popular weight-loss drugs such as Wegovy, Ozempic, and Trulicity.
It also entered into a partnership with Eli Lilly & Co. (NYSE:LLY) recently, in order to give its members access to the latter’s weight-loss drug, Zepbound.
Price Action: The stock was up 11.20% on Tuesday, but is down nearly 57% after hours, following the company’s announcement to file for bankruptcy.
Despite its woes, WW International has a favorable price trend in the short term, according to Benzinga Edge Stock Rankings. For more insights, sign up for Benzinga Edge.
Photo Courtesy: Jonathan Weiss On Shutterstock.com
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