Bed Bath & Beyond Stock Soars 92%, But Will It Last?
By On Monday, February 7th, 2023, Bed Bath & Beyond experienced an unexpected surge in its share price, rocketing 92% to $5.86. This stock surge comes after the company warned of its solvency challenges and considered bankruptcy due to defaulting on a credit line and skipping interest payments on some of its debts. In an attempt to avoid bankruptcy, Bed Bath & Beyond announced the sale of a new set of securities that could raise more than $1 billion.
The retailer said in securities filings that the cash injection would be used to cover some of their debts after defaulting on a loan with JPMorgan the previous month, and missing a $25 million interest payment on February 1.[0] The company is expecting to receive $225 million in the offering upfront plus an additional $800 million in proceeds over time. B. Riley Securities will be the sole bookrunner for the offering.[1]
Bed Bath & Beyond has been desperately seeking investors willing to inject cash into the company or buy it. Investors are likely to be wary of buying the volatile stock, but they could find some interest from the “less rational meme stock crowd,” according to Neil Saunders, managing director of GlobalData.[1] He cautioned, however, “there is no guarantee that the offering will yield the desired results” and investors may be deterred by the company's weak balance sheet and mountain of debt.[1]
Hudson Bay Capital Management has been identified as the anchor investor of the share sale.[2] The company is also hoping to raise an additional $800 million over time through the execution of the warrants it issues.[3] Wedbush has slashed its price target on the stock to zero from $1, indicating that it expects the company to soon be worthless.[4]
If the funding and sell-off fail, Bed Bath & Beyond will be forced into bankruptcy. This could spell disaster for the beleaguered home goods retailer, and leave investors with a worthless stock.
0. “Bed Bath & Beyond lines up funding in a last-ditch bid to avoid bankruptcy” CNBC, 7 Feb. 2023, https://www.cnbc.com/2023/02/07/bed-bath-beyond-funding-bankruptcy-worries.html
1. “Bed Bath & Beyond lines up funding in a last-ditch bid to avoid bankruptcy” msnNOW, 7 Feb. 2023, https://www.msn.com/en-us/money/companies/bed-bath-and-beyond-lines-up-funding-in-a-last-ditch-bid-to-avoid-bankruptcy/ar-AA17deDU
2. “Hudson Bay Is Anchor Investor in Bed Bath & Beyond Share Sale” Yahoo News, 7 Feb. 2023, https://news.yahoo.com/hudson-bay-anchor-investor-bed-163556289.html
3. “Bed Bath & Beyond Plans Share Sale in Bid to Avoid Bankruptcy” Yahoo News, 7 Feb. 2023, https://news.yahoo.com/bed-bath-beyond-plans-share-220242769.html
4. “Bed Bath & Beyond stock slides as retailer warns of risks in investing” MarketWatch, 7 Feb. 2023, https://www.marketwatch.com/story/bed-bath-beyond-stock-slides-31-premarket-to-erase-some-of-mondays-rally-01675768878
