Rent the Runway, Inc. — financial distress indicators
Financial-health summary
Rent the Runway, Inc.'s reported numbers place it in the 'Very weak' financial-health band (distress score 75/100). The main indicators are liabilities exceed assets (negative equity), market-implied default probability >20% and share price down >80% from 52-week high. Independently, the Ohlson accounting model puts its 1-year failure probability at 93% and the market-implied (Merton) default probability is 75.0%. In its favour: high insider/promoter ownership (74%) aligns management with survival.
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 1.25× 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).
Merton distance-to-default -0.67 σ → PD 75%.
Structural (Merton/KMV) model: equity is a call option on assets; low distance-to-default means assets are close to the default point.
Price is -81% from its 52-week high.
Equity markets price distress early; collapses of this size usually reflect fear of wipe-out in a restructuring.
O-score 2.56 → model probability 93%.
Ohlson (1980) logit model of 1-year corporate failure; O > 0 (p > 50%) is the original failure cut-off.
Share count up +752% in a year.
Survival financing: repeated equity raises at depressed prices.
Current ratio is 0.75.
Short-term obligations exceed short-term resources — the company relies on rolling over credit.
Recurring net losses.
Repeated losses are a core input in both Ohlson and Altman failure models.
Short-term debt is 1.1× cash on hand.
Maturity wall: debt due within a year must be refinanced, which is the most common proximate cause of filings.
Revenue vs net income
Cash generation
Debt vs cash vs equity
✅ Mitigating factors
- High insider/promoter ownership (74%) aligns management with survival.
📰 Recent news scan
- Rent the Runway (RENT) Grew Revenue 20.8%. Can Higher Spending Produce Sustainable Cash Flow?Yahoo Finance · 2026-09-17
- Rent the Runway (RENT) Q2 2026 Earnings Call TranscriptYahoo Finance · 2026-09-15
- Rent the Runway Inc (RENT) (Q2 2026) Earnings Call Highlights: Record Revenue and New CEO Amid ...Yahoo Finance · 2026-09-11
- Rent the Runway forges ahead with discovery upgrades as it names new CEOYahoo Finance · 2026-09-11
- Rent the Runway Q2 Earnings Call HighlightsYahoo Finance · 2026-09-11
- Rent the Runway Names Paige Thomas CEOYahoo Finance · 2026-09-11
⚖️ 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 Rent the Runway, Inc.'s financial-health indicators show?
As of 2026-10-08, Rent the Runway, Inc.'s public financial data places it in the 'Very weak' band with a distress score of 75/100, driven by liabilities exceed assets (negative equity), market-implied default probability >20% and share price down >80% from 52-week high. 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 Rent the Runway, Inc.'s financial distress score?
75/100 ('Very weak'). Ohlson O-score 2.56 (model 1-year failure probability 93%). Merton distance-to-default -0.67 σ (model default probability 75.0%).
What works in Rent the Runway, Inc.'s favour?
High insider/promoter ownership (74%) aligns management with survival.
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.
Other Consumer Discretionary companies with distress indicators
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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.