Hydrofarm Holdings Group, Inc. — financial distress indicators
Financial-health summary
Hydrofarm Holdings Group, Inc.'s reported numbers place it in the 'Very weak' financial-health band (distress score 100/100). The main indicators are liabilities exceed assets (negative equity), cash runway under 12 months and market-implied default probability >20%. Independently, the Ohlson accounting model puts its 1-year failure probability at 100% and the market-implied (Merton) default probability is 93.2%.
Stress by dimension
Share price — last 12 months
Indicators behind the score
Each red flag shows the evidence from the company’s own filings and the financial or legal principle behind it. Points add to the 0–100 score.
Total liabilities are 1.66× total assets.
Balance-sheet insolvency test: debts exceeding the fair value of assets is the statutory definition of 'insolvent' in 11 U.S.C. §101(32).
At the current free-cash-flow burn, cash covers ~5 months.
Going-concern standard: management must assess ability to continue for 12 months (ASC 205-40). Runway below that horizon forces dilution, asset sales or default.
Merton distance-to-default -1.49 σ → PD 93%.
Structural (Merton/KMV) model: equity is a call option on assets; low distance-to-default means assets are close to the default point.
Current ratio is 0.33 (current assets cover 33% of near-term obligations).
Cash-flow insolvency test: inability to pay debts as they fall due is the trigger for both U.S. involuntary petitions and Indian IBC default.
Net income negative in 3 of 3 fiscal years.
Persistent losses erode equity and the capacity to absorb shocks.
Debt is 136% of assets while EBITDA is not positive.
With no operating earnings, repayment depends entirely on asset sales or fresh capital.
Operating cash flow negative in 2 of the last 3 years.
A business that cannot fund itself from operations depends on external capital to survive.
O-score 13.80 → model probability 100%.
Ohlson (1980) logit model of 1-year corporate failure; O > 0 (p > 50%) is the original failure cut-off.
Revenue changed -29% year over year.
Falling sales reduce cash available for debt service.
Last price $0.96.
Below the $1 minimum-bid listing standard (Nasdaq Rule 5550(a)(2) / NYSE 802.01C); sustained breach leads to delisting and loss of capital-market access.
Short-term debt is 26.1× cash on hand.
Maturity wall: debt due within a year must be refinanced, which is the most common proximate cause of filings.
Price is -72% from its 52-week high.
For financial firms a share-price run often precedes a deposit or funding run (confidence channel).
Operating margin fell from -22% to -206% in two years.
Sharp margin compression signals loss of pricing power or cost control.
Revenue declined every year for three years.
Structural, not cyclical, decline.
0 severe and 1 moderate distress-related headlines in the last 6 months.
Headlines are corroborating evidence only; they are weighted lightly and never drive a flag alone.
Revenue vs net income
Cash generation
Debt vs cash vs equity
✅ Mitigating factors
- No material mitigating factors found in the available data.
📰 Recent news scan
- restructurHydrofarm Holdings Group shares surge as traders speculate on restructuring and listing-compliance progress - Quiver QuantitativeGoogle News · 2026-08-03
- Hydrofarm Holdings Group Inc (NASDAQ: HYFM) Stock Price, News & Analysis - kalkine.caGoogle News · 2026-10-06
- HYFM Stock Erupts 360% As Peat Sale Fuels Turnaround Hopes - Timothy SykesGoogle News · 2026-08-05
- HYFM Stock Whipsaws As Traders Weigh Heavy Losses And Micro-Cap Volatility - StocksToTradeGoogle News · 2026-08-03
- Hydrofarm Sells Aurora Peat for $16M but Keeps Supply Deal - Stock TitanGoogle News · 2026-08-03
- Hydrofarm Holdings Group, Inc. (HYFM): 7 Best Vertical Farming and Hydroponic Stocks to Invest in - Yahoo FinanceGoogle News · 2026-05-08
⚖️ U.S. legal pathway — Title 11, U.S. Code
Which chapter would apply?
- Chapter 11 — reorganisation. Management usually stays in control as debtor-in-possession; the automatic stay (§362) halts collection; a plan must meet the best-interests test (§1129(a)(7)) and the absolute priority rule (§1129(b)) — creditors are paid before shareholders, who are frequently wiped out.
- Chapter 7 — liquidation. A trustee sells assets and distributes proceeds by statutory priority (§§507, 726).
- Subchapter V (“Chapter 5”) is a fast track for small-business debtors under a statutory debt cap, but SEC-reporting companies are excluded (§101(51D)) — so it rarely applies to listed companies.
What typically triggers a filing
- Payment default or covenant breach lenders will not waive; a debt maturity that cannot be refinanced.
- Auditor going-concern doubt (ASC 205-40 / PCAOB AS 2415) — often itself a default trigger in loan agreements.
- Creditors can force a case with an involuntary petition (§303) if debts are not paid as they come due.
- Delisting after sustained sub-$1 prices or equity deficits cuts off equity funding.
Transactions shortly before filing can be clawed back (preferences — 90 days, §547; fraudulent transfers — 2 years, §548).
Frequently asked questions
What do Hydrofarm Holdings Group, Inc.'s financial-health indicators show?
As of 2026-10-08, Hydrofarm Holdings Group, Inc.'s public financial data places it in the 'Very weak' band with a distress score of 100/100, driven by liabilities exceed assets (negative equity), cash runway under 12 months and market-implied default probability >20%. This is a statistical screen of reported numbers — it does not mean the company is insolvent, has defaulted or will enter insolvency proceedings.
What is Hydrofarm Holdings Group, Inc.'s financial distress score?
100/100 ('Very weak'). Ohlson O-score 13.8 (model 1-year failure probability 100%). Merton distance-to-default -1.49 σ (model default probability 93.2%).
What works in Hydrofarm Holdings Group, Inc.'s favour?
No material mitigating factors were found in the available data.
How are shareholders treated if a company enters insolvency?
In a Chapter 11 reorganisation the absolute priority rule pays secured lenders, then unsecured creditors, before shareholders — so existing shares are usually cancelled or heavily diluted. In Chapter 7 the company is liquidated and shareholders rarely recover anything.
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Methodology
Score = capped sum of rule-based red flags across seven dimensions (liquidity, solvency, profitability, cash flow, sales trend, market signal, news). Ohlson O-score (1980) gives an accounting-based 1-year failure probability; Merton distance-to-default (Bharath & Shumway 2008) gives a market-implied probability. Financial institutions use a capital-based rule set. Recalculated every trading day from the latest filings, prices and news.