Floundering Fresh Vine Wine at odds with co-founders Nina Dobrev and Julianne Hough

Less than two years after going public, Fresh Vine Wine is at odds with its celebrity co-founders Nina Dobrev and Julianne Hough, has liquidated some of its inventory and is actively looking for someone to buy the company.

The Minnetonka-based company's interim chief executive said "it's in the best interest of our shareholders to investigate a range of strategic alternatives."

"As we navigate this process, we will do our best to keep shareholders apprised to the best of our ability," interim CEO Mike Pruitt said in a news release.

A Fresh Vine representative could not be reached for further comment.

The company — which tried to distinguish itself as a low-carb, low-calorie wine — has been grappling with declining sales, executive turnover and a significantly deflated stock price.

Fresh Vine's latest quarterly financial filing a few weeks ago said the company needed new debt or equity financing to continue its operations and outlined recent cost-cutting efforts. Those included a reduction in workforce to two full-time employees and selective liquidation of inventory.

Fresh Vine reported $330,000 in revenue for the second quarter, a 67.6% drop from a year ago, and a net loss of $4.4 million.

From the outset, Fresh Vine has relied on "celebrity-based affinity" as a key part of its marketing. By pairing with Dobrev and Hough, it hoped to leverage their large social media followings.

Now the company is at odds with Dobrev and Hough, Fresh Vine co-founders and shareholders, who say that Fresh Vine is not paying them licensing fees.

Each were getting paid $300,000 a year as part of a licensing agreement.

Fresh Vine stopped making those payments in August, according to letters sent by Hough's company Jaybird Investments and Dobrev. With the company in default of their licensing agreements, they said, they would be terminating the arrangement within 30 days if they are not paid.

Executive turnover has been a constant for the company since its December 2021 IPO. Roger Cockroft was installed as its new CEO in late April but left the company less than three months later.

Pruitt, who has been on the board of directors since the IPO, is the company's fourth leader in two years. He is the only person currently listed as a member of the management team on the company's investor relations website.

Fresh Vine raised $22 million from a December 2021 initial public stock offering at the tail end of a surge in IPO activity. The shares were priced at $10 when the company went public and never traded above that mark. Since the beginning of this year, shares have consistently traded below $1 a share.

While 2021 was a very busy year for IPOs, many of the companies that went public that year have seen their stocks struggle.

"The class of 2021 IPOs has largely underperformed, averaging a -48% return from offer, with over three-quarters trading below issue [price]. As is typically the case, small issuers like Fresh Vine Wine have performed worse than the broader group," said Avery Spear, senior data analyst with Connecticut-based Renaissance Capital which tracks IPO stocks.

Renaissance Capital defines small issuers as IPOs that raised less than $50 million.

Fresh Vine is not alone as a wine startup facing challenges.

California-based Winc Inc., an online wine club, went public in November 2021 and filed for Chapter 11 bankruptcy a year later. Los Angeles-based Amass Brands acquired Winc's operating assets.

Fresh Vine fired CEO Janelle Anderson in June 2022. Anderson promptly sued the company for wrongful termination, alleging she had been dismissed after reporting that Damian Novak and Rick Nechio had misappropriated more than $1 million from the company "for their own personal use and/or the use of other companies owned by Novak and Nechio."

Novak and Nechio are co-founders of Fresh Vine. Both have served on the board and remain shareholders. The company's proxy filed in October showed that Novak and Nechio owned 38.3% of Fresh Vine. Dobrev and Hough own 20.9%.

On the day Cockroft resigned, the employment of Hitesh Dheri, the company's chief financial officer, also ended as did the board tenure of Michelle Hawkins Whetstone after five months.

Whetstone is married to Jamey Whetstone, a well-regarded winemaker in Napa Valley, with whom the company had contracted to create wines for Fresh Vine.

The SEC Filing on July 20 said both Cockroft's and Whetstone's resignations "were not due to disagreement with the company."

Naming Pruitt interim CEO on July 19 also caused issues. The move put the company into temporary noncompliance with certain rules with its stock exchange. The company was issued a notice on July 31 that the stock would be delisted if it didn't fix its board composition within 75 days.

Fresh Vine acknowledged that the exploration of strategic alternatives is no guarantee of a deal.

The company's statement said: "There can be no assurance that this process will result in the company pursuing a particular transaction or other strategic outcome. Fresh Vine Wine has not set a timetable for completion of this process."