Shares of Sharper Image (NASDAQ: SHRP) are down more than 20% today as bankruptcy looms due to lawsuits alleging that the company's air purifiers are ineffective.
According to the Daily Business Review, "Financial experts for retailer Sharper Image are expected to testify today that the company could be pushed into bankruptcy if it is forced to pay up to $900 million to settle a class action lawsuit being pushed by 27 state attorneys general and several plaintiffs attorneys."
It doesn't really take a financial expert to tell that Sharper Image doesn't have $900 million to settle a lawsuit. The company has been reporting massive losses in recent quarters, and shareholder's equity has dwindled to around $100 million.
The lawsuit alleges that the company's wildly popular Ionic Breeze air purifiers don't do what they say they do and, in many cases, can exacerbate health problems.
In addition to the company's financial problems, the negative press surrounding the lawsuits has very likely eliminated much of the value of the Sharper Image brand.
Sharper Image might look cheap with its market cap of $65 million. But there's a good chance that it's headed to zero.
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