What Rent the Runway’s Lender Takeover Means

Some companies should never go public—or maybe even exist. Rent the Runway might be in that group. The clothing-rental subscription service—one of a bunch of mid-sized online shopping companies to go public in recent years—says its mission “is to power women to feel their best every day.” How about trying to make money? After years of steady losses, funded in part with debt, time is running out for the company. On Thursday, its main lender said it had taken control by converting much of that debt to equity. 

Co-founder and CEO Jennifer Hyman will stay in the job, but she has given up her supervoting shares—which provided her an outsize share of the vote—ensuring she’ll no longer have control of what happens at the company. In a note to staff, Hyman cast the developments as “very positive news for our company's future,” which in a way it is. Rent the Runway at least hasn’t filed for bankruptcy or shut its doors. But otherwise, it’s hard to see a lender takeover as anything more than a step toward a sale of the business, most likely to a traditional retailer, which might be better able to turn the rental operation into a sustainable enterprise. Certainly, Hyman hasn’t been able to pull that off. (More details are here.)