Following years of consecutive sales declines, collectibles giant Funko has admitted to investors that it is running out of money and might have to shut down operations next year if things don’t turn around. 

In a Q3 SEC filing last week, Funko attributes its decline in financial health to pressures from tariffs, a shifting retail environment, declining working capital and an inability to meet multiple credit deadlines when they mature next September. The company reported a net income loss of US$1 million in Q3, but its total liabilities increased from US$305 million at the end of last year to US$457 million on September 30. 

How did things reach this point? 

Like many toycos during the pandemic, Funko experienced a massive surge in sales. The company rapidly expanded the distribution of its collectible vinyl figures in new markets and territories, while simultaneously launching more product lines to meet a heightened market demand. This boom peaked in 2021, when the toyco posted more than US$1 billion in global net sales—a 58% sales increase from 2020. 

But red flags from this sudden and explosive growth began to appear the following year, when Funko reported that its held inventory totaled US$246.4 million, shooting up 48% from its warehouse levels in 2021. And with demand slowing and retailers not biting on the unsold inventory, Funko decided to eliminate as much as US$36 million in overstocked collectibles in 2023.

Who’s steering the ship?

Funko has had a revolving door of CEOs, unable to keep most in the office for more than a year. This pattern began when ex-CEO Brian Mariotti (2005-2020) took back his post from Andrew Perlmutter in 2022, and then later stepped down himself in 2023. 

Board member Michael Lunsford was tapped as interim CEO and kept the seat warm until the company appointed ex-Wizards of the Coast president Cynthia Williams last year. Then when Williams departed abruptly in July, Lunsford took up the interim CEO position again, but only held it for a month before appointing former Netflix consumer products VP Josh Simon to take over in August. 

What’s being done? 

With less than three months in the CEO chair, Simon has worked with Funko’s leaders to develop a risk mitigation plan that the company believes will help it survive with enough liquidity to stay in business and meet its credit agreement obligations. The plan includes shifting manufacturing out of China, decreasing its activity level, and working with sourcing partners to mitigate costs. At home, Funko plans to raise additional cash through refinancing its debt, pursuing new growth strategies in markets unaffected by tariffs, and evaluating the potential sale of the entire company.