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Less than two months after Fluid Truck’s board of directors ousted the sibling founders from their executive positions, the company laid off 30% of its employees, filed for Chapter 11 bankruptcy protection and found a potential buyer to take over the business, pending court. Approval, according to bankruptcy filings and information from a former employee.
Fluid has also been approved on an interim basis as of today for a $7 million loan to keep the business running and fund the restructuring and sale through the end of the year.
The bankruptcy filing in a Delaware court comes as the company’s losses are mounting and it faces several lawsuits, including a class action lawsuit filed on October 10 in Colorado, after it allegedly failed to pay money owed to members of the Liquid Vehicle Investor Program (FVIP)-based program. It allows individuals, including employees and small business owners, to purchase fleets of vans and trucks to rent on the platform under Fluid management.
Fluid Truck has estimated that the number of creditors awaiting payment is about 5,500. The company owes FVIP members $12 million, and owes vendors $26 million. This is in addition to the $20.6 million cash loss incurred by Fluid Truck in 2023.
James Eberhard and Jennifer Snyder, Fluid Truck’s sister co-founders and former CEO and chief legal counsel, respectively, founded the startup, which is referred to as the Zipcar of commercial vehicles, in 2016. Since then, Fluid Truck has raised more than 80 million dollars in funds. $1 million in venture and expansion funds in 400 cities in 32 states across the United States. But the company soon found itself in a deep financial hole under Eberhard’s watch due to a combination of macroeconomic factors and poorly managed insurance claims.
The liquid deficit built up and bad relations began to fester between Eberhard and two minority shareholders on the board — Bison Capital and Ingka Investments — according to people familiar with the matter. Eberhard was unable to raise more capital to finance the company’s losses, and in July, the board of directors voted to remove him and Snyder from their positions.
Eberhard’s replacement, Scott Avila of Paladin Management, began exploring liquidation options in August, according to a declaration he filed in bankruptcy court on Oct. 16.
But then Fluid Truck received a big, long-awaited payment from a customer, and decided to use that momentum to try to sell the company. That’s when Kingbee Rentals, a small car rental agency in West Valley City, Utah, unexpectedly stepped forward as a potential buyer.
The only problem? Kingbee could not have afforded to acquire all of Fluid Truck’s assets on its own. Fluid Truck wasn’t able to keep the lights on much longer. So, in its bankruptcy filing, Fluid Truck asked the courts to approve emergency financing in the form of a $7 million debtor-in-possession loan from Kingbee and some existing investors, which the court approved on an interim basis on Friday. .
“DIP lenders basically said: We’ll loan you this money, but if the sale doesn’t go through by December 31, you’re in default, and we can liquidate the business,” said Adam Stein Sapir, a DIP investor. Bankruptcy expert in Leading Finance GroupTechCrunch said. “It gives them a hammer to do something if (liquids) exceed that deadline.”
It’s unclear how much Fluid Truck will be able to sell its assets for, but Stein-Sapir says it could be around $7 million. This is bad news for any unsecured lenders, such as FVIP members, who will be among the last to receive repayment.
“For people who don’t have insurance here, it looks very bleak in terms of the recovery,” Stein Sapir said. “Unless they file a lien or have some sort of security in that money, they’re going to have some problems.”
Fluid Truck did not immediately respond to a request for comment.
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