THQ filed for chapter 11 bankruptcy today. When we hear of a company going bankrupt, we tend to think it’s the end of the line for that company. After all, going bankrupt is an indicator of not having any money to stay above water. However, there are different types of bankruptcy that have different effects on business and individuals. Chapter 11 bankruptcy is typically reserved for businesses. Since THQ filed for chapter 11 bankruptcy, there is a chance the company will not disappear from the industry. Had THQ filed for chapter 7 bankruptcy, its assets would have been sold and the company would likely shut down.
Chapter 11 is used to restructure businesses. In THQ’s case, it intends to sell its four studios and unreleased games to what’s referred to as a “stalking horse bidder.” That means THQ gets to decide what potential buyer will get to bid first on its assets in an effort to avoid low bids. In this case, the stalking horse bidder is Clearlake Capital Group. Clearlake’s bid is $60 million for THQ’s assets. Other companies can also put up a bid, but Clearlake has the overall advantage.
While THQ goes through the bankruptcy process, it says business will continue as normal. There are no intended layoffs or disruptions with retail chains across the United States. That means the development of THQ’s games are going to continue uninterrupted. However, THQ will be removed from NASDAQ listings. At this time, THQ’s stock is trading at around $0.42 a share.