3 tech fallen angels that could go bankrupt in 2023

By:
on Jan 3, 2023
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  • Bankruptcies are expected to rise in the US this year.
  • Carvana is saddled with over $6 billion of debt.
  • WeWork's cash hoard is dwindling while its leases are still rising.

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Bankruptcies have been falling in the United States despite the challenging macroeconomic conditions of the past few years. However, 2023 could be a different year, with rising defaults by technology companies as their stock prices dwindle and financing dries. Therefore, we could see some defaults in 2023. If this happens, some or all of these tech fallen angels could go bankrupt in 2023.

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WeWork

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WeWork (NYSE: WE) stock price plunged to an all-time low in 2022. In total, the shares plunged by more than 80% in 2022 as demand for the shares waned. The firm’s business slowed down while the cash burn continued. 

A key challenge for WeWork is that its business model is straining since it has significantly high lease costs. Its most recent finances showd that it has over $830 million in lease obligations and over $3.2 billion in long-term debt. These are substantial sums for a company that has seen its cash dwindle.

Its cash dropped from $923 million in December 2021 to $460 million in the most recent quarter. It hinted that it would end Q4 with about $300 million. Softbank has provided the company over $10 billion in cash in the past few years.

This is no the first time that WeWork has stared at bankruptcy. Before its failed IPO, the company was running out of money. It was saved by Softbank, which will likely not have the patience to do it again this year. Therefore, there is a high possibility that the company will go bankrupt in 2023.

Beyond Meat 

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Beyond Meat (NASDAQ: BYND) stock price also plunged in 2022. In fact, the stock has been in a downward trend since it peaked at $237 in July 2019. The company is facing significant challenges that could see it go out of business.

First, its cash reserves is dwindling. The company’s cash stood at more than $886 million in October 2021 to just $390 million in October last year. It has continued dwindling in the past few months. At the same time, its long-term debt has ballooned from $1.12 billion to over $1.3 billion. 

Second, competition in the industry has continued rising. Some of the top competitors in the industry are Impossible Foods and Incogmeato. Third, the firm has a manufacturing scaling problem since it does not do its own manufacturing. 

Carvana 

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Carvana (NYSE: CVNA) stock price had a terrible performance in 2022. It plunged by more than 98% from its highest level in 2021. The company’s biggest mistake was to acquire Adesa in a $2 billion. The buyout pushed its total debt to more than $6.2 billion. 

With the used car market recoiling, bankruptcy is a big possibility in 2023. The most recent results showed that the company’s net interest expenses rose from $48 million in Q3 of 2021 to $153 million in Q3 of 2022. 

There are other well-known brands that could go out of business in 2023. Some of the most notable names are Mullen Automotive, Blue Apron, Kazoo, and Nikola Corporation.

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