Galloway Capital builds 3% WW stake, pushes for debt deal amid bankruptcy rumors

Investing.com – Galloway Capital Partners (WA:CPAP) is urging WW International Inc (NASDAQ:WW) to avoid Chapter 11 bankruptcy, after disclosing a 2.87% stake in the embattled weight management company. The firm’s Chief Investment Officer, Bruce Galloway, told Investing.com that Weight Watchers still has solid fundamentals and does not meet the criteria for insolvency, making a bankruptcy filing both unwarranted and damaging to equity holders.

The company, burdened by more than $1.6 billion in debt and impacted by competition from GLP-1 drugs like Ozempic, is reportedly in talks with bondholders about a court-supervised restructuring. A recent Wall Street Journal article said the company is preparing for a potential Chapter 11 filing, sparking a collapse in its stock price from $1.40 to just $0.14, a drop Galloway believes reflects panic, not financial reality.

"This thing doesn’t need to go Chapter 11,” Galloway said. “You go Chapter 11 if you’re insolvent and can’t pay your bills… this is a company making $200 million.”

Instead of bankruptcy, Galloway is advocating for WW to pursue an out-of-court restructuring, giving creditors a partial equity stake in return for reducing debt, all while minimizing dilution for current shareholders. He emphasized that such a deal could reset the balance sheet while preserving upside for both sides.

Galloway told Investing.com that the firm began building its position in WW around nine months ago, seeing the company as a deep value opportunity. “We focus on companies that are wound down like a spring,” he said, referring to strong businesses with stock prices that have been continually pummeled by investors.

In WW’s case, Galloway sees a long-standing brand, massive member base, and growing clinical business as underappreciated assets in a market dominated by trading algorithms and momentum swings.

Galloway Capital has employed this playbook before. In December 2023, the firm launched an activist campaign at Regis (NASDAQ:RGS) Corporation, another highly-leveraged consumer brand. After urging changes to capital structure and offering board oversight, Regis ultimately restructured its debt and saw its stock surge over 200% on the year.

Earlier on Friday, Galloway sent a formal letter to WW CEO Tara Comonte warning that bankruptcy would “significantly impair the shareholders and be an extreme breach of the Board and Management’s fiduciary duty.” He called the company “not insolvent” and said the debt maturities, which begin in 2026, leave time for a consensual solution.

If the company proceeds with a bankruptcy filing, Galloway said in his letter that he may move to form an equity committee and pursue other remedies to protect shareholder interests. He also emphasized the importance of preserving WW’s net operating losses, which could be lost in a court-led restructuring, reducing long-term value.

Galloway is also open to broader strategic moves, including mergers with private companies in related healthcare sectors, such as diabetes management or hormone therapy. He believes the Weight Watchers brand, active user base, and trusted positioning in the wellness space could prove valuable if repurposed across health categories.

As the company continues talks with lenders, Galloway’s public campaign introduces a new voice into the high-stakes negotiations. With its stock having lost more than 95% of its value and trade headlines fueling volatility, what WW decides over the coming weeks could determine whether the company stabilizes, or wipes out its investors entirely.

Since the letter from Galloway surfaced, WWI stock skyrocketed 168% at Friday’s close, as investors examine Galloway’s track record and eye the potential of WW being brought back from the brink.

This article first appeared in Investing.com