Loot Crate Files For Bankruptcy Vows To Ship Boxes After Layoffs
Despite filing for bankruptcy, and laying off more workers, Loot Crate has promised to ship its remaining boxes to customers.
Loot Crate, known for its monthly loot box subscription plans, has detailed plans to file for Chapter 11 bankruptcy following additional layoffs of dozens of workers, including 150 warehouse workers that were let go from the company last month.
The news comes via a press release that was sent out last night. In the press release, Loot Crate details its plans to file for the Chapter 11 Bankruptcy, as well as plans for how the company will continue in the future. According to the news, the company will be available for purchase with one of its investors, Money Chest, already promising a $10 million loan to help keep the company afloat throughout the bankruptcy. Loot Crate is expected to sell rather quickly, though no known offers have been made just yet.
The popular loot box company has been facing some financial troubles as of late. In fact, the LA Times reports that rumors dating back to 2017 indicate that the company has been heading downhill in the finance department for quite some time. This has all come to a head in the last few months, with Loot Crate shutting down its warehouse last month, effectively laying off 150 people. There have also been reports on the layoffs did not come with any type of severance or benefits, which could lead to even more backlash on the company in the future.
Loot Crate Goes Bust Owing $20 Million To Customers
August 13, 2019 by Andrew Girdwood Links may earn commission
Has the subscription box model gone from boom to bust? The dominant player in the market, Loot Crate, has filed for Chapter 11 bankruptcy protection.
The situation looks bleak for Loot Crate, but a Chapter 11 means it is not over. Not yet.
Loot Crate owes $20m to subscribers in the form of pre-charged but not delivered items. It owes $30m to trade partners from where it was buying the goodies for the crates. According to ICv2, Loot Crate also owes $1m to Facebook, half a million to Marvel and half a million to MLB Advanced Media.
The situation turned against Loot Crate when a financial partner, Midtown Madison Management, started to take its money back withdrawing from Loot Crates accounts, as it is allowed to do under the terms of the loan. Midtown Madison had loaned some $21m to the company.
The last straw was Vantiv. Vantiv is the company that processes the credit cards of Loot Crates customers, and it feared being caught in the middle. Vantiv stopped processing customer credit cards, worried about people asking for refunds that Loot Crate might not be able to provide.
Chapter 11, though, is a protective measure which allows companies to restructure. This restructuring often means selling assets to address immediate concerns and then selling the company.
Loot Crates attempt to survive has resulted in around 60 layoffs already. Loot Crates Chief Executive Officer Chris Davis told press
Loot Crate The Curated Pop Culture Subscription Service Has Filed For Bankruptcy
It has filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code.
Loot Crate, the subscription service that sends its subscribers curated boxes every month full of items relating to various pop culture franchises, has filed for bankruptcy and let go much of its work force. Although the website and store is still up, Loot Box is now on the market for acquisition. It is expected to finalise a sale within the next 45 days.
As Gizmodo reports, last month the company let go 150 of its warehouse workers, and dozens of other workers have been let go this week. Loot Crate has received a commitment from Money Chest LLC for more funding of up to $10 million, which will allow the company to keep operating for now. According to the press release the company put out about their situation, “employees and customers should not notice any difference in operations as a result of the filing or during the sale process except for the better.”
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However, some customers have reported not receiving new boxes from Loot Crate for months – responses to the company’s about their bankruptcy point towards customers who are as many as seven boxes behind on their subscriptions. Former senior community manager Shawnee Hale has tweeted out that those let go did not receive severance pay, either.
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Monthly Subscription Service Whose Shareholders Include Actor Robert Downey Jr Has Baseline Offer For Potential Auction
A sample of Loot Crate Inc.’s “geek and gamer” merchandise offered to subscribers of the service.
Loot Crate Inc., the geek and gamer subscription business backed by actor Robert Downey Jr.s venture-capital firm, plans to sell itself for more than $30 million to a creditor that will use the debt it is owed as currency.
The proposed deal with a Money Chest LLC affiliate will be subject to higher and better bids in a potential auction supervised by the U.S. Bankruptcy Court in Wilmington, Del. Money Chest is a lender and bondholder affiliated with an investor group that includes a large collectibles maker and distributor.
Chris And Matthew’s Ventures Before Loot Crate
Chris Davis is the son of tech-giant Qualcomm’s CFO George Davis, so the idea of starting new businesses was innate in him. A Claremont McKenna College alum, Chris had participated in several hackathons following his graduation, which included developing a dating app called Box Office Buddies.
On the other hand, Matthew was interested in technology from a very young age, which led him to develop a passionate love of gaming and consoles. He took up a job as an editor for his high school newspaper and became obsessed with creating new content. However, after leaving school, Matthew started working for big companies like Microsoft and Apple, but soon learned that working for a corporation bored him to death.
He quit and decided to follow his own path in the corporate world.
He started a consulting agency focused on social media outreach, and worked with big companies during the late 2000s and early 2010s, helping them promote their brands through social media.
Matt and Chris met at a business seminar in Los Angeles in August 2012. Participants at the weekend event would pitch their ideas with new, out-of-the-box business models, and Chris’ idea was a monthly subscription service for geeks and gamers. The concept was straightforward – put Comic-Con in a box.
When Matthew heard the idea, he was immediately in – and their journey began!
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Employees Report No Notice Or Severance Despite Promises That Operations Will Continue As Usual
Subscription box service company Loot Crate has filed for bankruptcy, agreeing to be acquired following continued liquidity struggles over the last year and a half or longer.
In a press release, CEO Chris Davis acknowledged that the company had been unable to recover from a string of past struggles over the last 18 months. But those seem to go back going back to at least 2016, when the company first laid off 12, then held layoffs again in 2017 before defaulting on a loan that it then refinanced in 2018 thanks to a $21 million term-loan. Most recently, 150 employees were laid off in July when Loot Crate closed a plant in Vernon, CA.
At least one factor in these ongoing financial troubles appears to be the addition of more and more “themed” Loot Crates alongside its regular subscription service, the number and specificity of which quickly became unsustainable.
Now, investor Money Chest LLC has purchased the company’s term-loan and offered up to $10 million in funding to keep operations running as planned. And according to Davis, that’s the plan.
“Daily operations will continue as usual, unique and exciting fan items will be purchased, crates will be shipped, and all aspects of the business will go on as before the Chapter 11 filing. Our employees will continue to be paid as usual during this transaction.”
However, former employees claim that all is not as smooth as Loot Crate has promised.
GamesIndustry.biz has reached out to Loot Crate for comment.
Loot Crate Bought By Neca Changes Name To The Loot Company
Bleeding Cool has been covering the bankruptcy of Loot Crate, the monthly subscription geek create that ruled the roost but whose recent days have been plagued with disappointment.
It spawned many competitors, even a few that are still surviving. But as their competition went bust or ceased business, the market leader Loot Crate seemed to have less of a market to lead. Built on subscriber growth, that number which neared half a million halved over the last year or so. They marketed themselves on exclusive items, with some that are genuinely hard to find now and valuable as a result. However, a combination of over order and production saw them cannibalise that exclusivity by selling the items individually at massive discount. Numbers fell. And faced with not being able to get rid of excess stock, even at discounted prices, they started replacing new items in boxes with ‘classic’ items. And then sold shirts en masse to companies such as Ollie’s Discount Outlets or Zavvi in the UK. Which downgraded the appeal of the boxes even further. And numbers dropped off a cliff. They entered Chapter 11 bankruptcy, but not before firing up to fifty staff without notice or severance pay, owing millions to vendors, and defaulting on tens of millions of dollars in loans. We also looked at one employee’s ground-floor observations of how it all went wrong.
Loot Crate subscribers received the following e-mail late last night
Will you trust it more now that NECA is involved?
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Loot Crate Files Chapter 11 Lays Off Dozens
Loot Crate, the leading geek and gaming subscription box service since 2012, has filed for Chapter 11 bankruptcy and laid off about 50 employees.
The geek-and-gaming-centric subscription box service Loot Crate has filed for Chapter 11 bankruptcy and laid off approximately 50 employees.
According to The LA Times, “Its credit-card processor is withholding customer billings, Loot Crate hasnt shipped goods tied to $20 million in sales, and the company owes more than $30 million in trade debt.” Additionally, the company owes more than $5.87 million in sales taxes.
Loot Crate was founded in 2012 by Chris Davis and Matthew Arevalo and within two years, the company had over 200,000 subscribers across the globe. The boxes customers receive generally include things such as figurines, t-shirts, comic books and various other accessories and collectibles. The company also uses rotating monthly themes to determine what type of merchandise its subscribers receive.
Once one of the fastest-growing startups, Loot Crate’s woes began after defaulting on a loan in 2017. That loan was later refinanced and has now been purchased by Money Chest, LLC, which will provide Loot Crate with a $10 million bankruptcy loan and serve as its stalking horse bidder.
Loot Crate: The Mystery Box Startup That Failed Because It Grew Too Fast
Loot Crate is the most popular subscription box service in the world and the idea behind it was very simple: Comic-Con in a box!
The founders of Loot Crate, Chris Davis and Matthew Arevalo, didn’t dive into an existing market – instead, they created a whole new market of subscription-based mystery box services.
The idea was for the most passionate comic book, movie, and video game fans to subscribe to the service and receive one box a month delivered to the door. The features of the boxes, or ‘the loot’, ranged from t-shirts and action figures, to snacks and badges – basically, geek heaven!
This is the story of how one man, supported by a fellow visionary, turned his geekdom into a $160 million dollar business, only to become a victim of his own success.
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Loot Crate Is Going Bankrupt But Does This Mean Game Over
Its kind of hard to believe that anything could ever take down the ultimate geek subscription box, but Loot Crate is officially going under. Cue anguished sighs heard round the internet.
The company, which has been curating genre-themed boxes of collectibles and swag since 2012 and still has around 250,000 subscribers has just announced that it is filing for Chapter 11 bankruptcy. Loot Crate has been laying off workers and plans to sell its assets to the highest bidder within the next 45 days. It also promises to fulfill all pending orders during that time period. But that might be an issue when it still has $20 million in outstanding orders to go.
“We have worked diligently to overcome challenges we are very pleased with our progress from an operational efficiency standpoint, however, the company still faces liquidity issues,” Loot Crate’s CEO Chris Davis said in a press release. “After careful review of a wide range of available options, management determined that a sale of the Company is in the best interests of all parties, including our valued Looters and employees.”
In the meantime, Loot Crate and its remaining 60 full-time employees will stay afloat wit a $10 million bankruptcy loan from Money Chest LLC, one of its investors. This isnt the first time the company has run into financial problems, having defaulted on a $21 million loan just two years ago.
So does this really mean game over?
A Lucrative Marketing Strategy That Made Millions
Within weeks from launching, Loot Crate became extremely popular among geeks and gamers. The hype was real: everybody in the geek community talked about it, magazines were writing articles about it, and YouTubers unboxing Loot Crates got millions of views in a matter of hours.
The September 2012 Loot Crate Box was a massive hit, so before the Box was released, they thought it would be a cool idea to put a t-shirt inside too. Afterward, Chris and Matthew changed the design for the February 2013 box, attracting even more subscribers and attention to their product.
Loot Crate’s rapid growth was a result of Matthew’s social media knowledge. He knew the power of social networks and used them to attract new subscribers and make the brand more popular.
By 2013, Loot Crate was sending out free boxes to famous YouTubers, which was a form of advertising that was relatively new at the time. The Loot Crate unboxing videos got so popular, some YouTubers paid for their own Loot Crate boxes just so they could film an unboxing video!
Although the subscribers base was growing, the profit wasn’t. The founders decided to raise the price of the box from $13.37 to $29 in May 2014, significantly raising the profit margin, and surprising some of their fans.
Not that they stopped buying the boxes!
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Loot Crate Files For Bankruptcy Lays Off Workers
The once-popular Loot Crate is officially filing for bankruptcy, amid layoffs, warehouse changes, massive debts, and unpaid taxes.
Loot Crate was once a staple of pop culture, filling up Instagram feeds and YouTube with unboxings, reviews, and spoilers. Sadly, the once dominant monthly subscription box is filing for bankruptcy, and recently laid off dozens of warehouse workers. Loot Crate is still planning to ship all remaining boxes to paying customers, though that even seems like a stretch as in some cases, customers haven’t received their merchandise in nearly three months.
As stated in a press release distributed overnight, Loot Crate is in the process of filing for Chapter 11 bankruptcy. LC has had financial difficulties as of late, such as defaulting on a $21 million loan from 2017. Eventually, LC hopes to sell the company. Recently, roughly 150 employees were laid off following a warehouse closure and transfer to a third-party logistics company, 50 employees were released last week, and now there are only 60 full-time workers still remaining.
“There’s currently no plan to open a new warehouse, as the 3rd party logistics company and their warehouse afford us the opportunity to work out of a singular warehouse location for our primary shipping and receiving needs,” a Loot Crate spokesman said to the LA Business Journal.
Hours For The First Subscriptions
Chris had the business know-how, and Matthew knew how to maintain an online presence. They created Loot Crate just a few days after a weekend business retreat, acquiring 50 subscribers just 48 hours after launching. No, this wasn’t just a simple business exercise – Loot Crate was on!
They came up with the name and logo in the first 48 hours as well, and the first Loot Crate box was shipped in August 2012.
The first month, they had more than 200 subscribers, so the duo packed 220 boxes in Matthew’s back garden in just 8 hours, and shipped them all by standard UPS mail. The boxes contained gamer toys, food, and other gaming-related products with the purpose of grabbing the attention of gamers and geeks.
Chris and Matthew called the subscribers ‘Looters’, and each box contained a unique ‘Looter number’ – something they knew geeks would love. What subscribers also loved was the excitement of opening a box without knowing what was inside it.
The mystery box market was non-existent in 2012, so Chris and Matthew had to work out all the features and pricing of the boxes themselves. The initial price of the Loot Crates was $13.37, an ironic gamer price denoting ‘leet speak’, which also gathered attention. The first box contained a greeting card, a Marvel action figure toy, a few energy snacks, a superhero-inspired cologne, and a key chain.