Australia’s largest online bookstore, Booktopia (ASX: BKG) may be on the brink of insolvency with the retailer requesting the ASX continue its suspension of BKG shares while the Company seeks funding to provide ongoing working capital. 

As cited in a statement by Booktopia, the Company highlighted its ongoing efforts “to seek funding to improve its liquidity, meet redundancy costs, and to provide it with ongoing working capital.” 

The request for an extension follows a similar plea made just a week ago, reflecting the persistent liquidity challenges the Company faces. The earlier statement noted that Booktopia is exploring alternative strategic options and engaging with potential funding sources to ensure its financial viability. 

Booktopia shares last traded at $0.045 cents on 12 June 2024 when BKG shares were first suspended, a long way from the $2.30 IPO Offer Price when Booktopia was floated in 2020. 

Subsequent to the extended suspension of BKG shares, Booktopia has called off its proposal to issue 10.6 million BKG shares to parties related to Director, Tony Nash for bridging funding that would have facilitated redundancy payments to approximately 50 staff. 

Those shares would have been issued at a valuation of $0.06 per share, effectively a 33% premium on the current share price. But with the funding arrangement cancelled and no longer set for shareholder approval, Booktopia will seek to pay out those redundancies via other means. 

The financial turmoil at Booktopia has been compounded by recent organisational changes and cost-cutting measures. CEO David Nenke resigned with immediate effect on June 3, prompting Booktopia’s Chairman, Peter George, to assume the role of Executive Chairman while Nash, the Company’s founder, returned as Executive Director and Sales Director.

The restructuring is part of a comprehensive review initiated earlier this year, aimed at delivering annualised cost savings of $6.1 million by FY25. 

While Booktopia had thrived through the pandemic when BKG shares reached all-time highs around $2.85 in July 2021, financial struggles have been compounded by breaches in consumer law around Booktopia’s refund policies. It led the Australian Competition and Consumer Commission (ACCC) to pursue legal action against Booktopia in December 2021 with the Federal Court handing down a $6.1 million fine to the retailer for misleading statements and breaching consumer guarantee rights. 

Although Booktopia accepted the penalty and commenced paying it off, it organised a 5 year repayment plan, of which they are not even 2 years in.