The Nasdaq-listed company on Aug. 19 entered share purchase agreements with local private equity firms Beijing HCYK Corporation Management Partner and Timing Capital Limited.
HCYK will purchase 3.75 million Class A ordinary shares worth $3 million, while Timing Capital will buy 1.25 million Class A ordinary shares worth $1 million. The transaction is subject to customary closing conditions, such as HCYK obtaining governmental approvals in China for overseas direct investment.
“This important infusion will provide Secoo with the capital to implement our robust growth initiatives,” said Rixue Li, founder, chairman of the board and chief executive officer of the company, in a statement. “We are thrilled to welcome new investors to be part of our next-phase growth story.”
Plagued by prolonged COVID-19-related lockdowns, a slowing economy and fierce competition from local players such as Tmall and JD.com, Secoo filed for bankruptcy with the First Intermediate People’s Court of Beijing Municipality earlier this month. The company first filed for bankruptcy last January, but later withdrew the petition.
“So-called investment is in fact a delay in paying its debts,” claimed Ting Zhou, dean of Yaok Institute, a luxury research and consulting organization in China. “This company can be seen on the verge of collapse, just short of going through legal procedures.”
The company logged a net loss of 566 million renminbi, or $83.8 million, last year, a 547 percent increase from 2020. Revenue dropped almost 50 percent to 3.13 billion renminbi, or $434 million. The company shares currently trade at 30 cents each, a fraction of their highest point of $14.46 in 2018, a year after its initial public offering.
Secoo received a delisting warning in December 2021 after its shares dropped below $1 for 30 consecutive days. In January this year, the company revealed its plans to delist.
According to Tianyancha, China’s leading company data search platform, Secoo has been mired in over 500 sales contract disputes. Earlier this month, Secoo lost a court case to its early partner Prada, in which the Italian luxury brand sought to freeze more than 11 million renminbi, or $1.63 million, in assets from the online luxury retailer because of a contract dispute.
Secoo still operates 12 brick-and-mortar stores in China in first- to third-tier cities, according to the company’s WeChat Mini Program.
According to a former employee, the Shanghai shop was shut down in April. “The company said it was closed because of the pandemic, and they paid me 120,000 renminbi in severance,” said the former employee.
According to local media reports, Secoo’s headquarters in Beijing were almost empty last week. Security staff said employees began moving out six months ago and only some still use the fifth floor. An offline experience center on the first floor was also vacant.
Secoo later told local media that the reports are false, and “several hundred people are still working there.”