The once-promising Selina Hospitality has fallen from grace, as the board of directors filed a statement with the Securities Exchange Commission announcing their inability to avoid insolvency. Since going public in December 2021 with a $1.2 billion valuation, the company has experienced a catastrophic loss of value, leading to this dire situation. The appointment of joint administrators, including Andrew Johnson, Samuel Ballinger, and Ali Khaki of FTI Consulting LLP, signals the beginning of a process to explore all available options for the company. This may involve a sales process of operating subsidiaries and other assets, provided the necessary funds can be secured. Unfortunately, this filing for administration means that Selina will not be able to meet the listing requirements of the Nasdaq Stock Exchange, and its securities are expected to be delisted.
FTI’s Johnson attributes Selina’s downfall to the inability to achieve growth aspirations following the Covid-19 pandemic. A struggle to raise capital, exacerbated by increased interest rates and weakened trading performance, has left the company in a precarious position. Despite its initial success in catering to digital nomads and offering co-working spaces, Selina’s financial woes have caught up with them. The failure to repay a $50 million loan to IDB Invest and missing an interest payment of $455,000 on July 15 have further compounded the company’s financial troubles. IDB now has the right to take over collateral provided by Selina, potentially including significant assets in Latin America.
In an attempt to stabilize its finances, Selina undertook a series of restructuring efforts, including laying off more than 350 full-time employees to save $5.8 million. This move also incurred a one-time restructuring cost of approximately $1 million. Additionally, Selina began selectively exiting leases of underperforming locations in Mexico, the U.S., Greece, Austria, and Costa Rica to ensure long-term financial sustainability. Despite these efforts, the company’s financial situation continued to deteriorate, leading to the appointment of joint administrators to take control of its affairs.
Future Uncertainty and Impact
The insolvency of Selina Hospitality PLC has far-reaching implications for guests, employees, and other stakeholders. While the joint administrators are exploring options for the company on an accelerated basis, the future remains uncertain. The inability to provide financial support to subsidiaries means that regional management will face challenges in minimizing disruptions. As the joint administrators assume control over the company, the day-to-day operations of operating subsidiaries remain with their respective directors and management. The collapse of Selina serves as a cautionary tale for businesses aiming for rapid growth without maintaining financial stability and prudence.