Major E-commerce Giant’s Book Division Crumbles, Stock Value Decimated
Booktopia has entered voluntary administration due to poor book sales, resulting in losses of $16.7 million for the second half of last year.
A month after Booktopia announced it was securing $1 million (US$668 million) in emergency funding, its shares plummeted to just 6 cents, leading to the major online bookseller’s collapse and voluntary administration.
After signaling financial trouble on June 3 of this year, the company saw its chief executive depart and had to retract its earnings forecasts.
To cover expenses, Booktopia planned to borrow $1 million at an 18 percent interest rate for 50 redundancies at its Sydney headquarters. It could not afford this cost from its $212,000 cash reserves at the time.
The company intended to issue $400,000 in shares to secure a revolving debt facility from AFSG Capital, with an additional $200,000 to be paid in shares upon initial borrowing.
Booktopia, Australia’s largest bookseller, also owns Angus & Robertson.
The business faced a significant loss of $16.7 million for the six months ending on Dec. 31, a stark increase from a $3.9 million loss the previous year. Its shares have not been traded on the ASX since June 13.
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On June 28, the revolving debt facility was cancelled, and on July 3, McGrathNicol restructuring partners Keith Crawford, Matthew Caddy, and Damien Pasfield were appointed as administrators to reassess the business and consider a sale or recapitalization. Shares will remain suspended during this process.
Booktopia has faced challenges for several years, with losses in the past three years and a 98 percent drop in share value since their ASX debut in December 2020 at $2.30.
Recent turnover in senior executives has seen the resignation of CEO David Nenke after a year in the role, alongside at least 90 job redundancies in the last 18 months.
Despite the closure of global competitor Book Depository by Amazon last year, Booktopia faces fierce competition from Amazon and Australian retailers like Big W, Kmart, and Target, who sell discounted books. Additionally, Spotify’s introduction of free audiobooks to premium subscribers further challenges the market.
Booktopia’s biggest obstacle was the transition to a $12 million highly automated customer fulfillment center (CFC) in Sydney, which contributed to a large volume of one-off costs and operational disruptions, leading to lower sales.
The challenges for Booktopia do not reflect a decrease in Australians’ consumption of physical books, as Nielsen’s 2023 market data shows. The Australian book market was worth $1.33 billion in that year, slightly down from $1.4 billion in 2022, with sales volume decreasing from 70.9 million units to 69.8 million.
