Tag Archives: Restructuring

Vroom to wind down e-commerce vehicle sales

Vroom, the online car retailer that has its head office in Houston, is winding down its e-commerce vehicles and closing its one physical dealership, Texas Direct Auto, in Stafford. It will maintain its auto finance company and its vehicle analytics company.



The company went public via a $468 million IPO in June 2020 that priced its shares at $22 and gave the company a market cap of $2.8 billion. The shares peaked at $74 a few months later. In aftermarket trading, the shares are now $0.26.

Vroom has never been profitable and as of September 30, 2023 it had an accumulated deficit of $1.8 billion. Since the beginning of 2022, the business has been producing an EBITDA loss between $50 million and $60 million a quarter.

The company relocated from Manhattan to Houston in 2022 as part of its cost-cutting exercise.

The company had been trying to raise funds to scale the business. However, it faced an impending hurdle in that it has a $213 million debt due to mature in March 2024.

Late last year, the company settled with the state of Texas over allegations that it failed to disclose significant delays in transferring titles to buyers. Vroom agreed to pay $2 million in penalties and $1 million in attorney fees.

Vroom has about 900 employees, not including those employed by the auto finance company. The company occupies 100,000 square feet of office space in the Westchase area. That lease expires in November. The TDA dealership is approximately 58,000 square feet under a lease that expires in September.

Vroom – Press release

Crown Castle to cut headcount by 15% and close offices

Crown Castle, based near the Galleria, has announced it will cut its headcount by 15% (approx 750 jobs). It will also discontinue installation services as a product offering within its Tower segment. The company will incur one-time restructuring charges of approximately $70 million (mostly severance).



In addition, the company said it would consolidate office space and incur a charge of $50 million. That’s for accruing remaining lease obligations and writing off leasehold improvements. The company didn’t publicly disclose which offices were affected but an anonymous post on ‘TheLayoff.com’ stated that 13 regional offices were closing. That post also said that, if employees in those offices didn’t work for that specific region, they would have to move to Houston or leave the company.

Crown Castle has said that the mobile phone operators have slowed down tower construction activity by 50% in the second quarter as they complete the major part of their 5G investment roll-out.

The company owns and operates 40,000 large cell towers, 120,000 small cells and 85,000 miles of fiber. The company has revenues of around $7 billion, 90% of which comes from the rental of its infrastructure.

The other 10% of revenue comes from Tower Services with about 55% of that from Site preparation and 45% from installation services. It is the latter that is being discontinued. Unlike the rental business that has high margins under long-term contracts, services have lower margins (~30%) and volumes are more volatile.

Elliott Management

Back in 2020, activist investor Elliott Management took aim at Crown Castle, believing that it had under-performed because it invested heavily in Fiber, which had a return on capital of 3%. It also said the board was too insular. At the time, 8 of the 11 non-executive directors had served for at least 13 years and included two former CEOs.

Elliott launched its campaign with great fanfare in June 2020 and Crown Castle quickly responded by replacing three of its non-execs. However, the company didn’t make any other major changes and Elliott appeared to quietly drop its campaign soon thereafter.

At that time, Crown Castle’s market capitalization was $71 billion. It is currently $47 billion.  The company’s largest customer is T-Mobile. Its long-term growth prospects took a hit following the merger of T-Mobile and Sprint as the combined customer required less tower rentals.

That leads me to wonder if Elliott will come knocking on the door again, like they did recently with another Houston company, NRG. The Fiber business still earns a single digit return that is below the company’s cost of capital.

For good measure, today the company also announced two new non-exec directors. That will mean 5 out of 12 will have been appointed in the past three years.

SEC filing – 8-K – Restructuring

 

Struggling E&P company appoints Chief Restructuring Officer

Yuma Energy has appointed Tony Schnur as its Chief Restructuring Officer as it struggles to turn around its operations.

Yuma (market capitalization $3 million) has its head office in the Galleria area. Historically the company focused on onshore properties in Louisiana and southeastern Texas. During 2017, the company acquired some acreage in the Permian Basin through a joint venture.

As of September 30, 2018, the company had maxed out its borrowing base of $35 million and was in default on the covenants of its credit facility. It had a working capital deficit of $6 million and a loss of $7 million for the nine months ended September 30, 2018.

In October, the company retained Seaport Global Securities, an investment banking firm, to advise the company on its strategic alternatives.

The share price of the company is currently 12 cents. It has to improve by July 4, 2019 for the company to maintain its listing on the NYSE American. The shares have been trading below $1 since May 2018. That’s when the company first announced it was looking at strategic alternatives.

Mr Schnur has the experience for the role. He was the CEO of Camber Energy, a similarly-troubled zombie E&P company, from December 2012 to June 2017.  He was appointed to that role 6 weeks after being hired as CFO!

Mr Schnur will receive an annual salary of $240,000. He could also earn cash bonuses payable in three installments of 5%, 10% and 10% after 4, 8 and 12 months. He would also receive a cash bonus in the event of a successful completion of certain transactions.

Last month, COO Paul McKinney ‘resigned to pursue other opportunities’. He had a base salary of $400,000. The SEC filing was silent as to whether he is entitled to severance. If he is, Mr McKinney would receive a payment of 1.5 x base and target bonus ($1.2 million).

SEC filing