Shares of bankrupt Crumbs Bake Shop fell more than 58 percent on Monday, closing at 27 cents, after investors digested the news that a white knight investor’s proposed purchase of the chain would be made through Bankruptcy Court.
That means shareholders would likely take a lickin’ — with secured creditors getting a bulk of purchase price.
Last week, investors in the 11-year-old cupcake chain appeared to be on a sugar high, bidding the embattled company’s shares up from 3 cents to 65 cents after investor Marcus Lemonis proposed buying it.
Perhaps they thought he was going to make a cash offer for Crumbs.
But late Friday, the chain filed for Chapter 11 protection — and as the shares opened for trading for the first time since a reorganization was baked into its future, shares were iced, opening at 28 cents.
They closed Friday at 64¹/₂ cents.
Lemonis and a partner, Fischer Enterprises, which is already a Crumbs creditor, hope to buy the 50-store chain out of Chapter 11 for around $5.5 million.
According to a lawyer for the company, this stalking bid suggests the “first overbid” by an interloper hoping to take Crumbs from Lemonis and Fisher would have to exceed $6.5 million — an amount that includes a minimum overbid amount, a break-up fee and reasonable expenses.
The actual procedure for bidding on Crumbs will be set at a hearing later this month, the lawyer said.
Crumbs’ not-so-sweet business trajectory was the result of its former owners reliance on a single product, Lemonis said Monday in an interview with CNBC. “It was meant to be a bake shop — not a cupcake shop,” he said. “We’re trying to take Crumbs back to its original intention.”
If his bid is successful, Lemonis said Crumbs’ product line would be expanded to include other brands already in his investment stable — like Key West Key Lime Pie, Matt’s Cookies, Mr. Green Tea and Sweet Pete’s.
The serial entrepreneur said Oklahoma-based Fischer would likely add its Dippin’ Dots ice cream to Crumbs’ lineup as well.
In bankruptcy documents filed in New Jersey, Crumbs estimated its assets and its liabilities were both $20 million.