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NEW YORK - Rent the Runway, Inc. (NASDAQ:RENT) announced Thursday a growth recapitalization plan aimed at strengthening its balance sheet and supporting future business initiatives. According to InvestingPro data, the company has been operating with a significant debt burden of $386.6 million and a concerning Altman Z-Score of -5.89, indicating potential financial distress.
The transaction will convert a substantial portion of debt held by Aranda Principal Strategies (APS) into common equity. Based on an estimated closing date of December 31, 2025, approximately $243 million of debt would be converted at an effective price of $9.23 per share, representing an 80.9% premium to the recent 30-day volume weighted average price. This restructuring comes as the company’s stock has declined nearly 68% over the past year, with current trading levels significantly below InvestingPro’s calculated Fair Value.
APS is partnering with STORY3 Capital Partners and Nexus Capital Management to inject $20 million of new capital into the business. Upon completion, Rent the Runway’s outstanding debt will be reduced to $120 million with maturity extended to 2029.
The company will also initiate a rights offering allowing existing stockholders to purchase up to $12.5 million of shares at $4.08 per share, a 20% discount to the recent 30-day average price. The offering will be fully backstopped by the three investment partners.
"We brought the business to nearly free cash flow breakeven in 2024, continued to transform the way we acquire inventory with an asset-light model, and returned to a culture of customer obsession," said Jennifer Hyman, CEO and Co-founder of Rent the Runway. Despite challenging market conditions, the company maintains impressive gross profit margins of 72.54%, though it reported negative free cash flow of -$43.6 million in the last twelve months. For deeper insights into RENT’s financial health and 12 additional ProTips, visit InvestingPro.
The fashion rental platform reported ending Q1 2025 with 147,000 active subscribers, described as a record high. The company also noted improved customer retention rates.
As part of the transaction, Peter Comisar of STORY3 and Damian Giangiacomo of Nexus will join Rent the Runway’s board of directors. The deal requires stockholder approval and is expected to close by December 31, 2025.
Rent the Runway will continue operating as a public company trading under the RENT ticker on Nasdaq. The information in this article is based on a company press release.
In other recent news, Rent the Runway reported its Q1 FY2025 earnings, showing a 7.2% decline in total revenue to $69.6 million compared to the same period last year. Despite this revenue drop, the company experienced a 1% increase in its active subscriber base, reaching 147,157 subscribers. Additionally, Rent the Runway held its 2025 Annual Meeting of Stockholders, where three Class I directors were elected to serve until the 2028 annual meeting. The directors elected were Tim Bixby, Jennifer Fleiss, and Daniel Rosensweig. The meeting also saw the ratification of the company’s independent auditor. These developments are part of the company’s recent activities.
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