Celebrity founded beauty brand Pat McGrath Labs has filed for Chapter 11 bankruptcy protection after nearly a decade in business, listing over $50 million in liabilities in a petition submitted on January 22, 2026, in the Southern District of Florida. The move pauses a previously planned asset auction and shifts the company into a court supervised restructuring process rather than an immediate shutdown.
What the Chapter 11 filing actually means
According to court documents reviewed by multiple outlets, Pat McGrath Labs has reported estimated liabilities between $50 million and $100 million, with assets and creditor claims still being assessed. Under Chapter 11, the brand can continue day to day operations while it works on a plan to repay creditors and stabilize the business, rather than liquidating as in a Chapter 7 case.
In a filing dated January 25, the company’s legal team said Pat McGrath Labs aims to “continue to operate its business in the ordinary course, to preserve the value of its estate, to preserve jobs, and to facilitate its orderly reorganization.” The brand has also sought emergency court approval for more than $1 million in financing and for payments to critical vendors and employees, around $426,000 to suppliers, and $689,000 in wages and related compensation to keep operations running during the process.
Asset auction halted as restructuring takes center stage
The bankruptcy comes just as industry watchers were expecting Pat McGrath Labs to be auctioned off, with a sale originally scheduled for January 27, 2026. That auction has now been postponed indefinitely, with representatives telling trade outlets the focus is shifting to restructuring under court protection instead.
This pivot suggests the brand and its lenders are exploring ways to keep the business intact, potentially opening the door to a reorganization plan that brings in new capital, restructures debt, or introduces a new ownership structure, rather than a straightforward sale.
From a dollar valuation to steep markdowns
Founded in 2015 by legendary makeup artist Pat McGrath, Pat McGrath Labs surged quickly, powered by runway prestige, viral product drops and cult favorite formulas. In 2018, the brand was valued at over $1 billion after a $60 million investment from private equity firm Eurazeo, turning McGrath into one of beauty’s most high profile entrepreneur founders.
However, subsequent years brought financial pressure. Eurazeo exited its stake in 2021, and by 2024, investor Sienna Investment Managers had marked down its holding in Pat McGrath Labs by 88%, implying a valuation of around $174 million. Trade reports also flagged layoffs, internal restructuring, and rumors of discontinued products ahead of the Chapter 11 filing.
Will Pat McGrath Labs disappear from shelves?
For now, filings and industry coverage indicate that Pat McGrath Labs plans to keep selling products while under Chapter 11 protection. The brand has emphasized its commitment to its community, partners, and retailers, saying it intends to continue delivering its signature high impact artistry and launches as it works through restructuring.
In practical terms, that means shoppers should still be able to buy Pat McGrath Labs items in the near term, though distribution, launches, and inventory could fluctuate as the company renegotiates contracts and prioritizes key channels. Longer term outcomes will depend on the final court approved reorganization plan and whether a new investor or buyer emerges during the process.
Why this bankruptcy matters for beauty
The Pat McGrath Labs case highlights how even highly influential, founder driven brands with strong cultural relevance and past unicorn valuations can struggle amid rising costs, shifting consumer habits and intense competition in color cosmetics. It also shows how Chapter 11 has become a tool for beauty brands to pause distressed sales processes, reorganize debt, and attempt a controlled reset rather than disappearing overnight.
For the wider market, the restructuring will be closely watched as a test of how much long term value remains in a name that once defined high end, editorial driven makeup and whether a leaner, restructured Pat McGrath Labs can find its footing again in a crowded, dupe driven landscape.
