The 7 Eleven Franchisees of New Zealand are in deep trouble as their shares in the business have plunged to $2.5 billion.
In the first quarter of 2016, 7 Eleven Holdings had a market value of $2 billion.
Its total assets were worth $2,074 million, or $936 per share.
Now the company has plunged to less than $2 million, less than half of the market value.
The shares are also down on the NZ$4.50 per share that investors paid for them in 2013, when they were worth nearly $6 billion.
The stock has fallen from NZ$10.80 in 2013 to just NZ$6.70 today.
Its main competitor is the Elevated Dog Bed Corporation, which operates the same elevator in Sydney and Melbourne.
Elevated Dog is now in a similar position to 7 Eleven, and is in the process of selling its stake.
Seven Eleven’s parent company, ESD, is in trouble.
It owes the company $700 million, and has said it will be liquidated.
One of the main issues is that the company is now relying on the value of its own stock to survive.
“The market has shown that the stock price is too important for the 7 Eleven brand to be dependent on the valuation of a company that has lost $300 million in the past four years,” said Richard Chua, director of research at investment banking firm PIMCO.
As a result, there is uncertainty about the company’s future.
“The stock market has also shown that 7 Eleven has a huge future as a company,” he said.
What happens next?
The company will need to find a buyer to secure a future for the business, but the future is also in question.
“It will depend on the outcome of the auction,” said Chua.
“If it’s sold, the company will have to find funding to repay the debt it has incurred, which is very difficult for a company of its size and stature to do,” he added.
Even if it sells, the shareholders will likely be left to pay a premium for the shares that have fallen in value.
They can be worth less than what they were at the start of the year.
But that won’t be the case for the future.
While the company could be sold, it may need to sell its main assets, like the elevators, for a profit.
It has the capacity to do that, but only if it has enough money to pay creditors.
If the company decides to continue with the business as is, it could also be able to get a loan from the Australian government.
However, it is unclear whether the government will be interested in the company, or whether it will give it the chance to refinance.
“At this point, it’s hard to tell,” said Craig Pape, analyst at Macquarie Capital.
And the company may have to go through a lengthy and difficult transition.