Days after Milwaukee-based short-term rental startup Frontdesk Inc. fired most of its workforce, it began a bankruptcy alternative that's intended to help it repay its creditors.
Frontdesk's liabilities totaled at least $14.59 million as of Nov. 30, 2023, according to a receivership petition filed Jan. 5 with a Milwaukee County circuit court. It owes $6.34 million to SWEL2 LLC, its first-position lender and an entity registered by William La Macchia, who is one of its investors.
Frontdesk shut down its short-term rental management business after laying off more than 100 workers last week, Frontdesk CEO Jesse DePinto said in a LinkedIn post Tuesday.
"Despite valiant efforts from the entire team, the market headwinds were simply too strong to make the model work profitably at scale," DePinto wrote.
The proposed receiver for Frontdesk is attorney Michael Polsky of Beck, Chaet, Bamberger and Polsky SC in Milwaukee.
In an email DePinto sent Tuesday to Frontdesk shareholders that was obtained by the Milwaukee Business Journal and Wisconsin Inno, DePinto explained that the role of the receiver is to maximize the benefit of Frontdesk's assets for the benefit of all stakeholders.
"We expect that the receiver will run a marketing and sale process with the goal of having a competitive bidding process that will take place over the next few months," DePinto wrote. "At this stage, we do not know whether the process will result in any potential distribution to shareholders."
In addition to the $6.34 million Frontdesk owes SWEL2 LLC, its liabilities include $5.72 million in long-term debt, $1.44 million in "current liabilities," around $657,000 in accrued payroll and tax liabilities, and $442,000 in unearned revenue liabilities, according to the Jan. 5 receivership petition filing. There are also other liabilities with an unknown amount.
As of Nov. 30, 2023, Frontdesk's assets totaled roughly $659,000 including cash on hand, accounts receivable and prepaid expenses. There are other assets with an unknown value, according to the filing.
Frontdesk was founded in 2017 and La Macchia invested in Frontdesk via La Macchia Holdings in 2019 as part of a $2.75 million round the startup was raising at the time.
Frontdesk's other investors include former Milwaukee Bucks co-owner Marc Lasry, the local angel investing group Silicon Pastures, Golden Angels Investors in Milwaukee, Lancaster Investments and Wisconsin Investment Partners in Madison, Stormbreaker Ventures in San Francisco and Motivate Venture Capital in Chicago.
Frontdesk has raised at least $22 million in equity financing and was attempting to raise additional capital in late December.
