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Investing.com -- Rent the Runway (NASDAQ:RENT) stock surged 20% after the fashion rental company announced a comprehensive growth recapitalization plan aimed at strengthening its balance sheet and supporting future expansion.
The transformative capital transaction will dramatically reduce the company’s debt burden, with Aranda Principal Strategies (APS) converting approximately $243 million of debt into common equity at an effective price of $9.23 per share - representing an 80.9% premium to the recent 30-day volume weighted average price of $5.10.
The recapitalization also includes $20 million in fresh capital from APS, STORY3 Capital Partners (WA:CPAP), and Nexus Capital Management to support growth initiatives. Following the transaction, Rent the Runway’s outstanding debt will be reduced to $120 million with maturity extended to 2029.
"Rent the Runway has executed a significant and successful strengthening of the business over the past 18 months. We brought the business to nearly free cash flow breakeven in 2024," said Jennifer Hyman, CEO and Co-founder of Rent the Runway, noting that the partnership will allow the company to "grow in a more sustainable, healthy way."
The company plans to continue executing its multi-year transformation strategy focused on growing its customer base and enhancing its platform. Rent the Runway reported ending the first quarter of 2025 with a record high of 147,000 active subscribers and its strongest quarterly customer retention in four years.
As part of the deal, existing stockholders will have the opportunity to purchase up to $12.5 million of shares at $4.08 per share through a rights offering, representing a 20% discount to the recent trading price.
The transaction, which requires stockholder approval, is expected to close by December 31, 2025. Upon completion, Peter Comisar of STORY3 and Damian Giangiacomo of Nexus will join Rent the Runway’s Board of Directors.
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