The Fallout from Thrasio's Collapse: A Clash of Private Equity Giants

The collapse of eCommerce startup Thrasio has reportedly triggered a bitter feud between its former private equity backers. Oaktree Capital Management has written a scathing letter to Silver Lake and Advent, criticizing their oversight of Thrasio, which filed for bankruptcy earlier this year. The letter, seen by the Financial Times, accuses the two firms of misplacing Oaktree's trust and failing to exercise proper control over the company's operations.

Uncovering the Cracks in Thrasio's Foundations

The Rise and Fall of a Promising Startup

Thrasio, a third-party aggregator of Amazon products, had once been valued at a staggering $6 billion. However, the company's fortunes took a sharp turn for the worse last year, as reports emerged that it was grappling with financial difficulties following a drop in online spending in the wake of the COVID-19 pandemic. Faced with these challenges, Thrasio was forced to consider restructuring options, ultimately leading to its bankruptcy filing earlier this year.

The Blame Game: Oaktree Calls Out Silver Lake and Advent

In the aftermath of Thrasio's collapse, Oaktree Capital Management has taken a bold step, penning a letter to its former partners, Silver Lake and Advent. The letter, addressed to investors and obtained by the Financial Times, paints a damning picture of the oversight provided by the two private equity firms.Oaktree's letter states that its "trust in Silver Lake and Advent was 'misplaced.'" The trio, which had all backed Thrasio, acknowledged that they "didn't have appropriate controls in place and instead relied on our alignment with the sponsors." Oaktree went on to express its disappointment, stating that it "expected more judicious and cautious deployment of capital for growth, but our trust was misplaced."

The Rare Public Airing of Private Equity Disputes

The Financial Times notes that the public nature of this dispute is highly unusual in the world of private equity. Investment managers rarely criticize each other in such a direct and written manner, as PE firms often collaborate on various projects and need to maintain cordial relationships.However, the collapse of Thrasio has seemingly shattered that unwritten code of silence, with Oaktree taking the unprecedented step of publicly calling out its former partners. This move underscores the severity of the fallout and the depth of the rift between the private equity giants.

The Aggregator Sector Faces Mounting Challenges

Thrasio's bankruptcy is not an isolated incident in the aggregator sector. The company's downfall follows a troubled period for the industry, with Benitago Group filing for bankruptcy in 2023 and Apollo seeking a buyer for its aggregator, Perch.As funding dries up and macroeconomic pressures mount, the debt and obligations of these aggregators have become increasingly burdensome. The operating costs associated with managing a diverse portfolio of acquired brands, renegotiating vendor contracts, and improving supply chains have proven to be considerable, further exacerbating the challenges faced by these companies.

Thrasio's Uncertain Future

Despite emerging from bankruptcy in June with a "clean balance sheet, fresh capital and a renewed focus on [its] core business of building brands," Thrasio's future remains uncertain. A report from S&P Global Ratings issued just a week after the company's restructuring warned of a "possible default scenario in the next 12 months due to its tight liquidity and covenant headroom."As the industry grapples with these challenges, the fallout from Thrasio's collapse continues to reverberate, with the public dispute between its former private equity backers serving as a stark reminder of the high-stakes and high-pressure world of eCommerce aggregation.