Hoonigan, the automotive brand set up by the late rally driver Ken Block, has filed for Chapter 11 bankruptcy after racking up massive debt.
The brand had recently merged with Wheel Pros, who had just gone through a period of rapid growth following the pandemic, and managed to amass over $1 billion in debt.
Hoonigan
Hoonigan was founded by Brian Scotto and Block, a former professional rally driver, in 2011, initially as a lifestyle and media brand.
The brand has adapted since and, especially following its merger with Wheel Pros, could be seen as a more general automotive brand.
Social Media Following
Hoonigan can arguably trace its origins back to a 2008 video of Block performing impressive car maneuvers on a disused airfield.
Their ‘TheHoonigans’ Youtube channel has grown since then and amassed over 5 million subscribers, publishing over 1.2 thousand videos.
Merger With Wheel Pros
The popularity of the Hoonigan brand may have been a decisive factor in Wheel Pros decision to merge with the company in 2021.
Although the merger was completed in 2021, it was not until late 2023 that Wheel Pros completed the rebranding and emerged as the new Hoonigan.
Bankruptcy
Now, though, Hoonigan’s debts have caught up with it, and this has led to its bankruptcy filing.
The Chapter 11 filing revealed the extent of the bankruptcy, showing that the company had debts of over $1.2 billion.
What is Chapter 11 Bankruptcy?
Chapter 11 bankruptcy is an option that can be taken by companies that have become overwhelmed by debt.
Sometimes known as ‘reorganization bankruptcy,’ it entails a court-supervised restructuring of the debtors assets and liabilities.
Rapid Expansion
Hoonigan’s earlier incantation had undergone rapid expansion in the period up to and during the global pandemic.
Between June 2018 and December 2020, Wheels Pro had managed to acquire 5 different companies.
Supply Chain Issues
Like many companies at that time, Wheels Pro struggled with supply issues, but may have been particularly hard hit as an automotive manufacturer.
Aluminum, a common component in car parts, experienced a spike in prices due to global supply chain issues.
Rise and Fall
The revenue of the company soared as its expansion continued, but they were to be brought back down to earth last year.
From 2019 to 2022, revenue went from $844 million to $1.5 billion, but earnings targets were missed in 2023.
Too Aggressive
There is speculation that the aggressive growth strategy involving a number of acquisitions and mergers may have played a role in the accumulation of excess debt.
As the company restructures through their bankruptcy filings, they continue to seek a further $570 million in capital accumulation.
