Rite Aid has been on the decline for a long time but is one of those stocks that occasionally pop back up on the radar. 🧭
Today, the pharmacy chain said it’s preparing to file for bankruptcy in an attempt to address mass federal and state lawsuits over its role in the sale of opioids. The Chapter 11 bankruptcy filing would cover its more than $3.3 billion debt load and pending legal allegations that it oversupplied prescription painkillers. 💊
However, the company said it hasn’t yet agreed on a settlement and is planning to treat them as general unsecured claims. That means they’d rank behind a company’s collateralized debt in bankruptcy and share only what’s left over after secured claims are paid in full. 📒
The legal claims will likely cause Rite Aid to join pharmaceutical manufacturers Purdue Pharma, Mallinckrodt, and Endo International as companies at least partly bankrupted by opioid litigation. Suppose those cases are any indication of what could happen with Rite Aid. In that case, it’ll likely reach settlements of its opioid claims in bankruptcy that allocate more to opioid plaintiffs than other unsecured creditors.
The news sent shares of $RAD plunged to new all-time lows as fears that little to nothing will be left for common shareholders spread. We’ll see in the weeks ahead if it becomes a “meme stock” like other bankrupt companies have. But for now, things are looking pretty grim. 😬