Many companies find it necessary to file for Chapter 11 bankruptcy in order to address debt concerns and reorganize the company's structure with an eye toward returning to profitability. However, not all companies do so when they are connected to a former investor who has quickly become the number one target for federal authorities investigating securities and fraud schemes.
Recent reports detailed the Chapter 11 bankruptcy filing of KaleBios Pharmaceuticals, a biotechnology company based in California. In November of last year the now-infamous Martin Shkreli was part of an investor group that reportedly purchased about 70 percent of the company's stock. Mr. Shkreli has been making national headlines for purportedly being responsible for huge price-hikes for certain medications that were previously quite affordable. KaleBios Pharmaceuticals' company stock rose from around $2 per share to over $40 per share after the news broke that Mr. Shkreli was an investor in the company.
However, Mr. Shkreli has since been arrested on securities and fraud charges by federal authorities. He now apparently has no ties to KaleBios Pharmaceuticals, and the company is proceeding with a Chapter 11 bankruptcy filing that had reportedly been considered prior to Mr. Shkreli's investment in the company.
According to the reports, KaleBios Pharmaceuticals has approximately $2 million in debt, with about $8.4 million in assets. The reports indicate that when the company was first considering a bankruptcy filing the goal was to shutter the business, but there is no indication whether that is still the case after the abrupt entry and then exit of Mr. Shkreli in the picture.
Bankruptcy is a very real option for businesses facing financial challenges. However, which bankruptcy route best supports a business's interests depends on the particular circumstances at hand. Therefore, those businesses that are struggling with debt should consider speaking with an attorney to better assess their options.
Source: The New York Times, "KaloBios Files for Chapter 11 Bankruptcy," Rachel Abrams, Dec. 30, 2015