Forma Brands, the beauty incubator behind Morphe, Jaclyn Cosmetics and Ariana Grande’s R.E.M. Beauty, has filed for Chapter 11 bankruptcy protection in Delaware, one week after announcing Morphe had closed its US stores.
In a court filing, the company said its assets would be acquired by a group of lenders: Jefferies Finance LLC, Cerberus Capital Management LP and FB Intermediate Holdings LLC. Forma also secured about $33 million from creditors to continue operating.
In an October report by Reorg Research, later confirmed by BoF, Forma was said to be exploring emergency financing options, including a potential Chapter 11 filing. At the time, Reorg Research estimated the company had $600 million to $700 million in debt.
Experts said declaring bankruptcy could be a “lifeline” for the struggling beauty company once valued at over $2 billion. Following a majority investment from private equity firm General Atlantic in 2019, Morphe relaunched as incubator Forma Brands a year later.
According to internal documents reviewed by BoF, Forma Brands had budgeted for over $420 million in revenues in 2021, but was on track to come in about $80 million short of that figure. Morphe recorded sales of just $295 million in 2021, down from about $500 million in 2019, according to media reports.
The newly formed Forma Brands soon faced a string of setbacks, including a cosmetics slump; a pandemic that de-prioritised makeup and a Gen Z consumer with different beauty tastes and habits than Morphe’s millennial customers. Around the same time, Morphe distanced itself from longtime influencer collaborators Jeffree Star and James Charles, both embroiled in public feuds and controversies.
Plans to build other brands to stand alongside Morphe faltered. In 2020, Forma acquired Playa, a hair care line, and Lipstick Queen, a lipstick line, and introduced its own skin care and supplement lines. All were met with a tepid reception and disappointing sales.
Forma’s highest-profile launch was R.E.M. Beauty in 2021. The Ariana Grande-fronted line was seen as a top priority within the company, with resources diverted from other brands to support R.E.M.’s marketing and distribution efforts, according to several former Forma executives who spoke with BoF. However, the line’s sales failed to match expectations.
In August 2020, the company launched secondary Morphe line, Morphe 2, fronted by Charli and Dixie D’Amelio and targeted towards Gen Z. A skin care line with Charli D’Amelio and a beauty brand with Demi Lovato were both in development but never came to be. General Atlantic declined to comment.
In December 2022, BoF reported that Playa’s founder Shelby Wild sued Morphe and General Atlantic in New York State court, alleging the companies failed to adequately support her line after its 2020 acquisition. In court documents, Wild alleged that General Atlantic discussed plans to turn tiny but fast growing Playa into a $50 million business within five years. According to internal documents reviewed by BoF, Forma projected $2 million in sales for Playa in 2022, barely more than the year prior, and said it would “hold new product development on Playa.” Sephora confirmed it dropped Playa in 2022.
“Over the last year, Forma Brands has been implementing initiatives to stabilize our business and reposition our organization for long-term growth,” Simon Cowell, president of Forma Brands said in a statement Thursday. “This agreement is a testament to the strength of our brands most meaningful to our consumers, including Morphe and Morphe 2.”
