The Chapter 11 process allows companies to continue operating while reorganizing debts under court supervision. As outlined by the Administrative Office of the U.S. Courts, the procedure enables management to remain in control as a “debtor in possession,” subject to oversight by creditors and the court.
iRobot stated that its mobile app, warranty programs and product support will remain available during the restructuring. Existing distribution agreements with major retailers, as well as relationships with component suppliers, are expected to stay in place while the company operates under Chapter 11 protections.
The filing, however, wipes out existing equity value. In a notice to shareholders, iRobot warned that investors “will experience a total loss and not receive recovery on their investment” once the reorganization is completed. Shares closed at $4.32 on Friday, then plunged more than 65 percent when trading resumed Monday morning following the bankruptcy announcement.
Tariff Pressure and Financial Decline
The company’s finances deteriorated sharply in 2025 after U.S. tariff policy increased import duties on goods from several countries. Most of iRobot’s devices sold in the United States are manufactured in Vietnam, which became subject to a 46 percent duty under tariffs imposed by President Donald Trump earlier this year. Management said the additional levy added approximately $23 million to cost of goods sold during 2025.
Higher import expenses coincided with weaker demand in the domestic market. U.S. sales fell 33 percent year over year in the third quarter. Companywide revenue for the three months ended 30 September 2025 dropped to $145.8 million from $193.4 million a year earlier. The quarterly operating result swung to a loss of $17.7 million, compared with a profit of $7.3 million in the comparable period of 2024.
Accumulating losses left iRobot with limited liquidity heading into the holiday season. The company said the asset sale to Picea is intended to stabilize operations by aligning manufacturing and ownership, thereby eliminating markups previously paid to the contractor and ensuring consistent supply at lower cost.
Failed Amazon Bid and Strategic Alternatives
The bankruptcy filing comes less than two years after a proposed $1.7 billion takeover by Amazon.com Inc. collapsed when the e-commerce giant was unable to secure antitrust approval from regulators. Following termination of the agreement, iRobot began exploring strategic alternatives, including cost reductions, balance-sheet restructuring and potential asset sales.
Picea Robotics, which has produced most Roomba units for the past decade, emerged as the preferred buyer after agreeing to assume selected liabilities and provide debtor-in-possession financing during the Chapter 11 case. Specific financial terms of the purchase were not disclosed in Sunday’s announcement, but court filings are expected to detail how proceeds will be allocated among creditors.
iRobot emphasized that its international subsidiaries are not part of the U.S. bankruptcy petition. The company intends to seek recognition of the Chapter 11 proceedings in foreign jurisdictions to protect assets abroad and facilitate the global implementation of its reorganization strategy.
The first-day hearing in Delaware is scheduled for later this week, where iRobot will request customary relief to pay employee wages, honor customer warranties and continue critical vendor relationships. Additional motions will outline bidding procedures that could open the sale to higher offers, although Picea’s agreement now serves as the stalking-horse bid.
While management believes the combination with Picea will provide operational certainty, the timeline for emergence from Chapter 11 remains dependent on court approval, regulatory clearances where required and any competing proposals that may arise during the auction process.
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