Rad Power Bikes Files for Bankruptcy, Seeking Sale

Rad Power Bikes Files for Bankruptcy

Rad Power Bikes, a prominent electric bike manufacturer, initiated Chapter 11 bankruptcy proceedings on Monday.

This action follows earlier warnings to staff regarding a potential shutdown if new financial resources weren't secured.

Continued Operations During Restructuring

Despite the filing, the company intends to maintain normal business operations throughout the bankruptcy process.

A company spokesperson communicated to TechCrunch that they are actively seeking a buyer for the business, anticipating a sale within a 45 to 60-day timeframe.

Statement from Rad Power Bikes

According to a released statement, the restructuring is designed to ensure continued service to Rad Power’s customer base.

The company aims to preserve its existing relationships with riders, vendors, suppliers, and partners, and ideally, maintain the company as a going concern.

Industry Trend of E-Bike Bankruptcies

Rad Power is not alone in facing financial difficulties.

Several e-bike companies globally have experienced bankruptcy following a decline in demand after the surge experienced during the pandemic.

However, some companies, such as VanMoof and Cake, have successfully re-emerged through court-supervised restructuring and acquisition by new owners.

Failed Funding Attempts and Safety Concerns

In November, Rad Power informed employees of a promising funding opportunity that ultimately failed to materialize.

Shortly after, the Consumer Product Safety Commission (CPSC) issued a warning concerning older Rad Power batteries, citing a risk of serious injury and even death following 31 reported fire incidents.

Rad Power disputed the CPSC’s assessment of the battery safety.

Recent Company Changes

The past few years have presented challenges for Rad Power.

The company underwent multiple rounds of layoffs and a change in leadership earlier in the year, appointing Kathi Lentzsch as the new CEO.

Lentzsch, an executive with a proven track record in corporate turnarounds, initiated a strategic shift away from a direct-to-consumer sales model.

Shift to Retail Focus

The company is now prioritizing a retail-focused approach to expand its reach and strengthen customer connections.

Lentzsch expressed optimism about the company’s future, highlighting the potential for growth and brand evolution.

Financial Details of the Bankruptcy

Rad Power entered the bankruptcy process with reported assets of $32 million and liabilities totaling $73 million.

A significant portion of the debt, exceeding $8 million, is owed to U.S. Customs and Border Protection for unpaid tariffs, a claim the company has marked as “disputed” in its bankruptcy filings.

Impact of Tariffs

The extent to which tariffs contributed to Rad Power’s financial difficulties remains unclear.

However, this situation mirrors the challenges faced by Boosted, an electric skateboard company that ultimately failed, partially due to tariffs imposed on Chinese imports during Donald Trump’s presidency.

These tariffs reportedly diminished Boosted’s market position, contributing to its eventual closure.