Is YTB About To File For Bankruptcy Protection?

I am not willing to bet the farm on this but after receiving two emails from different sources, reading a lot of commentary on different blogs and forums, and taking some time to think it through, I agree that there is a good chance that YTB might consider filing for bankruptcy protection prior to the end of the year. Most likely in the form of a Chapter 7 filing.

It is painfully obvious, even to the casual observer, that they are really struggling with cash flow, as well as legal issues. In the last month, they have:

• Tried to sell the plane three times (at a loss)
  
• Sold off the lion's share of their headquarters land
• Sold off an office building including furnishings (at a loss)
• Reduced the price to join the scheme by 50%
• Offered ridiculous incentives for existing Reps to recruit more people
• Pre-selling 2009 Convention tickets at a discount to raise quick cash
  

In addition, they were unable to have the Class Action suits dismissed as hoped in the December 8, 2009 Status Hearing. And speaking of hearings, there is another one with the Attorney General scheduled for January 5, 2009.

YTB has been in full out reactive mode for some time now. They are desperately trying to prove to the authorities that they are legal. They have added a new booking engine, they are adding more product (potions and lotions) to their RTA sites. All of these moves are desperate attempts to bring the percentage of non-recruiting revenue up to an acceptable level to appease the Attorney General. And no one really has missed that nuance.

Here is how I predict it plays out--YTB has sold a lot of assets and the proceeds from the assets are likely now no longer assets of YTB, Inc.. The economy is tough despite Coach's proclamation that YTB is recessionproof. The Attorney General is looking to "shut down" YTB and the plaintiffs on the Class Action suits are looking for money. Well, YTB all of a sudden "succumbs" to the economy and files a Chapter 7 liquidation bankruptcy. All of the stock is worthless (did anyone notice the large sell offs the past week?). So a trustee comes in to sell the remaining few assets--remember the valuable ones have already been sold. They liquidate what they can to pay off the top tier creditors. The RTAs and Reps are last on the list. The Attorney General realizes that YTB is shut down and is satisfied and may drop the case. The Class Action suits will need to determine if they have the time, will, and money to pursue a judgment against the individuals since the company is no longer an ongoing concern (a concern brought up several times in the 10-Q filing by their own accounting firm). The Attorney General also needs to make the decision to continue to pursue the principles as well as the Reps that will be names as Does 1 to 100..

Meanwhile. YTB management will look like the poor victims of a poor economy. They will profess that they tried everything--selling assets, decreasing the costs, giving those that want to quit free months, all for the "benefit" of the Reps and RTAs. The Reps and RTAs will buy into this story (as they do with any story told from Wood River) and laud them as heroes. The Reps and RTAs will then re-group and some may stay in travel with a legitimate host, others (most) will simply move onto the next get rich quick pyramid scheme they see. And the three musketeers? They already have their hotel reservations for the 2009 Snake Oil Convention in Vegas!