Topline
Struggling retail giant Bed Bath & Beyond’s stocks tumbled to a new record low Thursday afternoon following the struggling retail giant’s proposal to consolidate its shares as it attempts to raise $300 million in a last-ditch effort to stave off bankruptcy.
Bed Bath & Beyond warned it could file for bankruptcy protection if its plans to raise $300 million … [+]
Key Facts
Shares of Bed Bath & Beyond are down more than 8% Thursday, falling to a record low of 31 cents, following the retailer’s proposal to implement a so-called reverse split stock, in which the company’s outstanding shares would be consolidated, resulting in a smaller number of more valuable shares.
If the proposal, which needs to be approved by shareholders at its May 9 meeting, is not approved, the company could be “unable to avoid bankruptcy,” company officials warned in a Securities and Exchange filing.
The ratio of the split stock needs to be determined by the company’s board, with CEO Sue Grove proposing a range of 1-for-10 to 1-for-20, meaning every 10 or 20 outstanding shares would be converted into one share.
The proposal comes one week after the company announced plans to sell up to $300 million in common stock through an “at-the-market” program designed to bring in equity to “immediately” reinvest in store inventory and avoid a bankruptcy filing.
Company officials sounded a similar alarm in a financial filing last week, warning it could file for bankruptcy protection if it fails to receive $300 million from the sale of stocks, and that in that case, shareholders “will likely receive no recovery at all for the securities offered.”
Big Number
86.5%. That’s how far Bed Bath & Beyond’s stocks have fallen since the start of the year, from $2.31—a drop in the bucket of the company’s peak of nearly $80 in December 2012.
Contra
Grove said last week the sale of stocks would allow the company to establish a “necessary financial runway” to restore the retail giant. Since the beginning of February, the company has raised roughly $360 million in equity capital, Grove said, and announced plans in February to raise $1 billion through an offering of preferred stock and warrants. Company officials have also attempted to assuage shareholders: attributing the company’s volatility and its market prices to “market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals.”
Key Background
Bed Bath & Beyond began as a linen store in New Jersey and exploded into a nationwide big-box retail giant with more than 1,500 stores in 2019. Over the past decade, however, it started to struggle to compete with the growing e-commerce market, shuttering brick-and-mortar locations and implementing large layoffs. Company co-founder Warren Eisenberg has since admitted the retailer was slow to adapt to online shopping, saying in a Wall Street Journal interview the company had “missed the boat on the internet.” Since the start of the Covid-19 pandemic, its struggles have only amplified: The big-box retailer cut one-fifth of its workforce and closed roughly 150 stores in August and announced another round of layoffs affecting 1,300 employees last month. Anthony Chukumba, a stock analyst with Loop Capital, told Yahoo News the company is “simply not relevant anymore.”
Further Reading
Bed Bath & Beyond Shares Drop 15% As Company Plans To Sell $300 Million In Stocks To Stave Off Bankruptcy (Forbes)
Bed, Bath & Be Gone: Inside The Wreck Of An Iconic Brand (Forbes)
Bed Bath & Beyond proposes reverse stock split as it struggles to avoid bankruptcy (CNBC)
Source: https://www.forbes.com/sites/brianbushard/2023/04/06/bed-bath–beyond-tumbles-to-record-low-and-warns-bankruptcy-may-be-unavoidable/