Fast Radius opted to go public in a merger with a special-purpose acquisition company, or SPAC, which sells shares to investors before identifying the business it intends to buy. Investors, however, can redeem their shares after the acquisition target is announced.
That’s what happened to Fast Radius, which had expected to raise $300 million to $445 million. More than 90 percent of investors in the SPAC redeemed their shares, according to its bankruptcy filing. The company ended up raising just $106 million.
"Fast Radius closed the transaction with the express intention of raising additional capital to bridge to profitability, while the amount raised was expected to be sufficient to fund operations through the end of the year," the company said in its bankruptcy filing.
After the SPAC merger was completed Feb. 4, shares dropped 25 percent to $7.63. They continued to fall, slipping below $1 per share in April. Fast Radius started looking for a buyer in July, and by October it appeared the company had found one. It was negotiating a cash deal with an unnamed public company that Fast Radius says would have provided a return for investors and paid back its creditors.
Bad timing struck again, when its suitor received an unsolicited takeover bid and withdrew its offer last week.
The company, which laid off 20 percent of its workforce Nov. 3, plans to continue operating through bankruptcy as it seeks a buyer. It has roughly $24 million in debt and $6.2 million in cash. It’s facing a potential cash crunch. In its bankruptcy filing, Fast Radius says its lenders had deferred November and December loan payments totaling $5.2 million.
With markets choppy and the Federal Reserve raising interest rates, capital is more difficult to come by and more expensive.
"We’re likely to see a wave of business failures from the rising cost of business capital," says Clint Francis, a Northwestern University law professor who specializes in bankruptcies.