U.S. National Security Concerns Threaten iRobot’s Bankruptcy Rescue

iRobot US4627261005

The proposed sale of iRobot Corp. to a Chinese manufacturer has drawn a formal warning from the U.S. Department of Justice (DOJ), throwing the company's Chapter 11 restructuring plan into jeopardy just ahead of a pivotal court hearing. The intervention, citing significant national security risks, could delay or even derail the entire bankruptcy process, dramatically increasing the threat of a total loss for the struggling robot maker's remaining shareholders.

In a formal filing to the U.S. Bankruptcy Court in Delaware on Wednesday, the Justice Department alerted the court that the planned acquisition by China's Shenzhen PICEA Robotics Co. presents potential risks to national security. The DOJ highlighted that the transaction would likely trigger a mandatory review by the Committee on Foreign Investment in the United States (CFIUS).

Such an investigation would significantly postpone the timeline of the bankruptcy plan or could fundamentally prevent its completion. This warning arrives at a highly sensitive moment, as a hearing to confirm the restructuring was scheduled for the same day. The move signals that Washington is unlikely to allow the transfer of sensitive U.S. technology and data to a Chinese-controlled entity without a thorough and lengthy examination.

Market reaction was immediately negative. The stock, which has traded at penny-stock levels since iRobot filed for Chapter 11 protection in December 2025, remained under heavy pressure. Shares closed Wednesday at $0.13, with trading volume seeing a notable decline.

A Steep Decline Culminates in Political Scrutiny

The current crisis marks a new low in a dramatic fall from grace for the Roomba vacuum maker. Its troubles accelerated after a planned $1.7 billion acquisition by Amazon collapsed in 2024 due to regulatory opposition. Although iRobot received a $94 million break-up fee, it was left without a viable long-term business model, ultimately leading to its Chapter 11 filing.

The restructuring blueprint now centers on a takeover by Shenzhen PICEA. Preparations for this move included the purchase of $191 million in iRobot bonds last November by Santrum Hong Kong, a subsidiary of the Chinese partner, to facilitate a "credit bid" acquisition.

Political resistance has been mounting for weeks. As early as January 8, U.S. Representatives Ritchie Torres and Zach Nunn publicly called for a strict CFIUS review, arguing that placing iRobot's mapping and camera data in Chinese hands would create an unacceptable security risk. The DOJ's formal action confirms the U.S. government shares these serious concerns.

Shareholders Face Mounting Risks of a Wipeout

The situation for equity holders is increasingly dire. The share price has collapsed by more than 98% over the past twelve months. The government's intervention creates a twofold problem:

1. Significant Delay:
   A standard CFIUS review typically extends over several months, a timeline that strains iRobot's limited liquidity within the ongoing bankruptcy proceedings.

2. Potential Collapse:
   Should the sale to Shenzhen PICEA be blocked, the core pillar of the entire restructuring strategy would vanish.

Pessimism spread to European markets. On the Munich stock exchange, the stock traded at €0.1165 late Wednesday, representing a single-day decline of nearly 20%.

Court's Decision Holds the Key

All attention now turns to the bankruptcy court in Delaware. The presiding judge must rule on how to proceed following the DOJ's objection. If the government's request for a stay or a review period is granted, any swift implementation of the reorganization plan will be impossible.

Consequently, market analysts see little chance for any meaningful recovery in shareholder equity. The central questions now revolve around the recovery rate for creditors and whether the technology behind the Roomba brand can survive under a new corporate structure. For the stock, this translates into sustained high volatility and the looming possibility of a trading suspension.