The company that once promised to make Appalachia the center of AgTech in the U.S. has filed for bankruptcy as it looks to reorganize its operations.
AppHarvest, the greenhouse-centered farm system, filed for bankruptcy in the Southern District of Texas on July 23. The move follows a turbulent few months for the company that has recently seen its revenue dwindle and its founder and CEO replaced. Now, the company is seeking to sell off its farms and restructure while moving in a new, and hopefully profitable, direction.
According to bankruptcy filings, the company obtained a commitment from Equilibrium, the company’s largest secured creditor, for $30 million on debtor-in-possession financing to fund operations at three of the company’s four farms.
“We have funding to keep the business running as usual until the last week of September at Morehead, Richmond, and Somerset,” company spokesman Travis Parman said in an email interview. “During this time, we’ll be working to sell the farms to investors with the goal of keeping them continuously operational so they continue to employ about the same number of folks as now.”
The company’s farm in Berea has already been sold to its distribution partner, Mastronardi Produce. Previously, AppHarvest owned the 60-acre indoor farm that produces tomatoes. In December, the company sold the property to Mastronardi and then leased the farm from it. Now, however, AppHarvest has said it has turned the farm over to Mastronardi.
In return, Mastronardi will provide AppHarvest with $3.75 million, as well as funding to support the company’s “restructuring plan,” AppHarvest said in a press release.
The company said it is diligently working to restructure operations so it can maximize value for creditors and to preserve the jobs it created. Parman said the company created 1,000 jobs at the four farms.
“Employees at the Berea farm already have been transitioned to the new owner, Mastronardi Produce,” Parman said. “Employees at Morehead, Somerset, and Richmond are focused on business as usual during this restructure and can expect to be compensated as usual and continue to have access to benefits. The goal is to minimize any disruption to employees.”
Tony Martin
The goal moving forward, Tony Martin, AppHarvest CEO, said, is to increase volume, quality and, sales.
“The AppHarvest board of directors and executive leadership evaluated several strategic alternatives to maximize value for all stakeholders prior to the Chapter 11 filing,” Martin said. “The Chapter 11 filing provides protection while we work to transition operation of our strategic plan, Project New Leaf, which has shown strong progress toward operational efficiencies resulting in higher sales, cost savings, and product quality.”
Started in 2018 by Kentuckian Jonathan Webb, AppHarvest was intended to be a new age in agriculture in the commonwealth that would bring economic development and jobs to Appalachia. Utilizing European greenhouse systems, the company put acres of agriculture under glass, allowing it to harvest nearly year-round. Additionally, the company said its Central Kentucky location was positioned to reach nearly 70 percent of American markets within a day’s drive — getting produce to retailers quicker and reducing greenhouse gas emissions.
By 2019, the company had gained the attention of investors, including Revolution’s Rise of the Rest Seed Fund, Inclusive Capital Partners, Equilibrium, Narya Capital, Lupa Systems, Breyer Capital, and Endeavor Catalyst. Board members for the company included Martha Stewart, Narya Capital co-founder and “Hillbilly Elegy” author JD Vance, Impossible Foods CFO David Lee, and impact investor Jeff Ubben.
In 2020, the company opened its Morehead operation, where it expected to produce about 45 million pounds of tomatoes annually. Other farms soon followed in Berea, Richmond, and Somerset, growing lettuce, more tomatoes, and berries.
After announcing it would move into office space on West Short Street in 2021, AppHarvest raised close to $475 million when it went public. By 2023, the company used its farms as collateral to obtain four loans worth $246 million, including one for $50 million backed by the U.S. Department of Agriculture.
But by August of that year, the company announced it had only $3.1 million in sales, citing labor and productivity challenges, and reduced its annual projected earnings. Later that year, the company was hit with five shareholder lawsuits in federal court alleging AppHarvest overstated hiring and retention figures, including in U.S. Securities and Exchange Commission filings, and that the company misled investors through its public statements. Those lawsuits are still pending.
As a result of challenges facing the company, in November 2022, a “restructuring” took place when president David Lee and COO Julie Nelson left the company. By then AppHarvest had accumulated a more than $270 million deficit and was warning investors there was “substantial doubt about our ability to continue as a growing concern.”
This January, Tony Martin took over the CEO position from Webb, who remains on the board. Martin, who has years of experience with controlled environment agriculture, said the focus going forward would be efficient operations.
“I believe AppHarvest has a tremendous opportunity to leverage its world-class CEA network at a time when both changing climate and major grocery retailers are demanding it." —Tony Martin
“AppHarvest is at an exciting inflection point transitioning from a construction and development mode to an organization focused on core operational excellence,” Martin said at the time. “I believe AppHarvest has a tremendous opportunity to leverage its world-class CEA network at a time when both changing climate and major grocery retailers are demanding it. We’re working to ramp up production and revenue by ensuring efficient, cost-effective delivery of high-quality produce to major grocers and restaurants.”
Parman said the company was working to find buyers for the farms.
“Multiple parties have expressed interest in the other three farms, and more continue to do so. The value of the farms is so great the likelihood of purchase is nearly 100 percent,” he said. “During the restructuring process, we are hosting prospective buyers and providing them details on the operating potential of the farms. The value of the farms is rooted in them remaining in operation to generate revenue, so we anticipate any potential buyer will maintain similar ongoing work.”
The company’s future, he said, is up to whoever buys the farms.
“What’s next will depend on how the buyers wish to leverage and manage the assets — through the existing team, independently, or some combination — and whether they wish to continue to use the AppHarvest name,” he said.