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Last week, the Funko Pop company hit investors with a dramatic disclosure. “There is substantial doubt about the Company’s ability to continue as a going concern for the next twelve months,” it revealed in its latest quarterly earnings report. This is the company warning that it’s at increasing risk of defaulting on its loans. How much is that? Roughly $241 million. I don’t think the banks will accept payment in the form of One Piece Funko Pops.
The company revealed that it amended its credit agreement with JPMorgan Chase Bank back in July in an effort to waive certain requirements and buy time in order to refinance its debt under more manageable terms. That sounds reasonable and the company is certainly spinning this situation as business as usual, but it’s also saying, in no uncertain terms, that there’s a decent chance it won’t be able to pay out everyone it owes by the end of the next 12 months unless something big changes.
“I want to reiterate the sense of urgency and opportunity around our Make Culture Pop strategy, executing across the intersection of culture, creativity, and commerce,” Josh Simon, who just joined as CEO in September after five years at Netflix, said during the latest earnings call. “In the short term, I’m looking to maintain the momentum [the chief financial officer] discussed.”
Is Funko in trouble?
He continued, “Over the long term, what’s most exciting to me, and I hope is equally exciting to our investors, are the multiple opportunities to transform the company for substantial growth. We have a strategic advantage from building this company over the last 27 years, and we intend to leverage that legacy and relationship with our community of fans to take advantage of the huge opportunity in the increasingly global world of entertainment and pop culture fandom.”
Who doesn’t love “multiple opportunities to transform the company for substantial growth”?
But the numbers are bad. Funko Pop lost $1 million last quarter, a harsh drop from the over $8 million in profit it made a year ago. Why is the collectible company tumbling off a cliff? You might think it has something to do with losing certain big licenses to competitors or flooding the market with way more junk than even the most die-hard fans are willing to absorb, but the biggest kiss of death came back in the spring in the form of President Trump’s trade war. Tariffs hit sales of cheap toys manufactured overseas hard.
Funko mystery boxes to the rescue
The company claims that’s all in the past, however, and the new CEO is touting a big anticipated boost from the upcoming releases of Stranger Things‘ final season and Wicked: For Good. He was also very proud of Funko’s recent Dodgers Championship Five Pack, which he attributed to the company’s new “quick strike” team that can essentially take any major pop culture event in the world and merchandize it at warp speed.
By far my favorite secret Funko strategy to not go bankrupt is its new Bitty line of mini-figures. That’s right. The company’s brilliant maneuver in its time of distress is just making Funkos smaller and combining them with loot boxes. “We are also planning new innovative retail experiences, such as selling Bitty Pop products through vending machines with a surprise or mystery element to the purchase experience,” the executive team said during the call last week. Inspired!
Will Funko still be around in five years? Will it be be acquired by another toy company or chopped up for parts in a private equity buyout? It’s hard to day. One thing’s for certain, though: the plastic faces it has littered across shelves and landfills will remain with us for decades if not centuries to come.
