AppHarvest bankruptcy: A look at the rise and fall of the once-lauded Eastern KY startup
When it first launched in 2018, agriculture tech startup AppHarvest promised to transform the country’s fruit and vegetable markets by building massive, multi-acre greenhouses tended by hundreds of employees, and Eastern Kentucky would become the center of it all.
But now, with the news of the company’s bankruptcy filing Monday, it seems that dream has withered before it could really take root.
Here’s a look at the rise and fall of AppHarvest, a company once valued at more than $1 billion that attracted private investors and support from the state and federal government.
January 2018: Jonathan Webb, a Kentucky-born graduate of the state’s flagship university, the University of Kentucky, incorporates AppHarvest. After working as a solar energy contractor employed by the U.S. Army, Webb wanted to use that experience to build some of the largest greenhouses in the nation. To run them, he’ll bring 140 jobs to Eastern Kentucky, a region that’s been left behind with the decline of the coal industry.
AppHarvest boasts some big names on its board of directors, including lifestyle entrepreneur Martha Stewart, as well as investor, Hillbilly Elegy author and junior U.S. senator from Ohio J.D. Vance. As of July 24, Stewart is still listed as a member of AppHarvest’s board of directors, according to the company’s website. Vance departed in 2021 after sending some controversial tweets, however.
September 2018: AppHarvest announces it will begin its vocational training efforts by launching a program at a Pikeville-area high school to train students for careers in the high-tech agriculture industry. At this point, App Harvest has faced some delays in getting its business off the ground. That will involve constructing massive greenhouses to grow fruits and vegetables for wholesale, including a facility spanning 2 million square feet in Pikeville.
Still, Webb remains optimistic, mainly because of Eastern Kentucky’s prime location. Only about a day’s drive from 70% of the U.S. population, Webb believes his business can revolutionize agriculture in America, with Eastern Kentucky at the center of it all.
October 2020: AppHarvest achieves its first milestone with the partial opening of its first farm in Morehead. The facility grows tomatoes, and over the next two years in Berea, Somerset and Richmond, the startup will build three more farms to grow leafy greens, berries and tomatoes, respectively.
Around the same time, the state grants AppHarvest $1.9 million in public money to build an industrial access road for its Morehead facility. AppHarvest spends more than $1.5 million of it.
February 2021: AppHarvest goes public on the NASDAQ, and it’s valued at more than $1 billion, according to a news website for agriculture investors. Raising $475 million in start-up capital, the now publicly traded company will go on to obtain four loans worth $246 million using its farms as collateral. AppHarvest counts the U.S. Department of Agriculture among its backers, with the agency endorsing one of its loans valued at $50 million.
August 2021: The trouble begins for AppHarvest when, in a company call with investors, it announces less than stellar second-quarter results. Its first harvest brought in a profit of only $3.1 million. At the time, the company cited “labor and productivity challenges,” a problem experienced by many companies at the time as they struggled to find enough labor to meet the surging post-pandemic demand. Still, even as other companies eventually found their footing, AppHarvest continued to operate with large losses, turning off investors.
September 2021: Things get worse for AppHarvest after the previous month’s bad financial news. The company faces the first of what will become five shareholder lawsuits in federal court alleging AppHarvest misled investors and regulators. The company disputes those allegations and requests for the lawsuits to be dismissed.
November 2022: AppHarvest is now undergoing a “restructuring,” announcing the departures of President David Lee and Chief Operating Officer Julie Nelson.
The company is now exploring new avenues for immediate cash to continue operating, including selling its new Berea farm to its distributor, Mastronardi Produce Limited. The company itself could also be sold off to another, AppHarvest says. The overall situation appears bleak for AppHarvest when it warns investors that, with a total debt of $270 million, “management believes there is substantial doubt about our ability to continue” doing business.
December 2022: The sale of AppHarvest’s Berea farm goes through, and in exchange, the struggling produce grower gets some much needed cash to stay afloat. The $127 million deal involves the sale of the company’s 15-acre, indoor farm to its distributor, Mastronardi Produce. AppHarvest will then lease the facility from Mastronardi for an initial term of 10 years at a rate of $9.5 million for the first year, after which the annual rate will increase.
AppHarvest uses the $57.5 million it nets from the deal to help pay back a $30 million bridge loan from Mastronardi, along with paying the first two years of rent on the Berea facility.
In the coming months, AppHarvest will take other desperate measures to raise needed funds, including selling 40 million of its shares at just $1 each.
June 2023: AppHarvest now faces foreclosure on one of its largest facilities if it doesn’t settle accounts with a creditor demanding more than $66 million.
The trouble began in early May, when a company called CEFF II AppHarvest Holdings alleged AppHarvest had defaulted on and violated the terms of a loan it granted for the construction of the company’s massive 60-acre greenhouse in Richmond. The creditor initially loaned AppHarvest more than $90 million, but after alleged construction delays and cost overruns for the Richmond facility, it was calling in the remainder of the loan, plus interest — about $66.7 million. If AppHarvest could not pay, the Richmond farm would be seized as collateral. What’s more, a default could spill over to AppHarvest’s flagship facility in Morehead and commence foreclosure proceedings there, as well.
July 2023: There’s a major leadership shake-up at AppHarvest when its founder and CEO Jonathan Webb announces he’ll be stepping down. Tony Martin, an industry veteran, takes the reins, as Kevin Willis is also named the new chairperson of the company’s board of directors.
Webb will remain with the company, though in a different role as its chief strategy officer. He will also keep his seat on the board.
“I founded AppHarvest based on a mission to improve domestic food security by farming more sustainably with climate-resilient practices while providing economic opportunity in Central Appalachia,” Webb said in a press release at the time.
July 24, 2023: AppHarvest files for bankruptcy over the weekend and the company makes the news official Monday with an announcement. With more than $341 million in debts, the company has plans to scale back its operations and repay its creditors.
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