Selina, an international hospitality company founded by Israelis Rafi Museri and Daniel Rudasevski, has informed its investors of potential bankruptcy and delisting from NASDAQ. Known for its successful hostels catering to digital nomads in South America, the company now faces significant financial troubles.
Since its IPO, which valued the company at $1.2 billion, Selina has seen a dramatic decline in value. The stock has plummeted by 95%, leaving the company with a current market value of approximately $20 million. The Inter-American Development Bank (IDB), which extended a $50 million loan to the company in 2020, has notified Selina that it is not meeting the loan terms, specifically failing to make a $450,000 interest payment due on July 15.
This notification comes after a series of financial challenges and massive losses in recent years, including a $200 million loss in 2022 and an accumulated equity deficit of $735 million. According to the report, the lending bank holds collateral on a significant portion of Selina’s assets in South America, which are among the group’s most profitable sites. This could further complicate Selina's ability to service its debt.
Currently, Selina operates 107 sites worldwide, including 14 in Israel, in partnership with the Hagag Group, which located, renovated and leased properties to the network. Hagag has written off more than 6 million shekels due to Selina’s difficulties and deferred its debt payment. The rapid expansion, particularly into urban centers in major cities worldwide, where Selina lacked a clear competitive advantage, has been a significant factor in its financial distress.
Selina also has announced the risk of being delisted from NASDAQ, as its stock trades below the minimum price required by the exchange. Additionally, the company will not publish its 2023 financial reports on the required date, further raising concerns about its financial health.
According to the report, Selina had a hearing on July 4 at NASDAQ, where it presented its plan to meet the requirements, but it has yet to receive a response regarding its continued listing. The company’s liquidity crisis and the delay in publishing its financial reports increase the likelihood of delisting.
Despite these challenges, Selina announced a few months ago a strategic partnership with Osprey, a private company targeting Selina’s core audience of students and young people, which has invested $35 million in the company. However, this investment has proven insufficient. Alongside this, Selina implemented a recovery plan that included closing 11 unprofitable sites and laying off 350 employees.
The recent capital raises, which included unlocking 52% of its restricted shares and offering investors discounts at the company’s resorts in exchange for purchasing shares, have significantly diluted the founders' holdings, now estimated to be less than 10% of the company’s shares.
Critics argue the main mistake was a flawed managerial vision, treating the company as a startup willing to forgo profits for the sake of expansion. Selina's financial future now hinges on its ability to raise additional capital and improve its short-term financial position.