Bed Bath & Beyond Inc.’s equity offering may be a lifeline as the troubled retailer teeters on the brink of bankruptcy — but it could spell trouble for the company’s shareholders, according to Wedbush analyst Seth Basham.
After the bell Tuesday, Bed Bath & Beyond
BBBY,
-0.38%
said it had closed the sale of convertible preferred stock as well as warrants to purchase common shares and convertible preferred stock. The sometime meme-stock darling raised about $225 million in the sale, as expected, and is expecting to receive an additional $800 million in future installments, assuming certain conditions are met.
But Wedbush analyst Seth Basham warns that while Bed Bath & Beyond has bought itself time, shareholders could feel the impact. “Against the odds, [Bed Bath & Beyond] secured financing for as much as ~$1.125 [billion] of additional capital, reducing the near-term risk that it enters bankruptcy and buying it more time to execute its turnaround efforts,” he said in a note released Wednesday. “However, this lifeline comes at an incredible cost to existing shareholders who could see over 80% dilution from convertible preferred shares and warrants if fully executed.”
Now read: Bed Bath & Beyond making ‘last gasp’ to survive before filing for bankruptcy, says analyst, warning that the equity will eventually be wiped out
The analyst continued: “As we see a low probability that the company achieves its 2023 turnaround plan, we ascribe little-to-no value to the company’s equity on a probability-weighted basis. Failure to secure the additional $800 [million] and/or an unsuccessful turnaround in 2023 could put the company back on bankruptcy’s doorstep.”
Wedbush maintained its underperform rating for Bed Bath & Beyond but slightly increased its price target to 25 cents from zero.
Bed Bath & Beyond’s stock rose 8.4% before market open Thursday, after ending Wednesday’s session down 13.3%, outpacing the S&P 500’s
SPX,
-0.88%
decline of 1.1%. Fellow meme stock AMC Entertainment Holdings Inc.
AMC,
-6.29%
fell 7.4% on Wednesday, and GameStop Corp.
GME,
-6.78%
ended the session down 0.6%.
Also read: Bed Bath & Beyond leads meme-stock plunge as AMC and GameStop also tumble
Bed Bath & Beyond’s announcement last month that it may need to declare bankruptcy sent the company’s stock sinking toward a 30-year low and followed a turbulent few years marked by strategic missteps, cash burn, challenging underlying business trends and the impact of the COVID-19 pandemic. Bed Bath & Beyond also recently disclosed that it was in default on loans that were called in.
Bed Bath & Beyond also announced the closure of almost 130 stores on Jan. 10 as it attempts to resolve its financial woes. On Tuesday, the company announced “an ultimate operating goal” of 360 stores across the U.S., in addition to approximately 120 Buybuy Baby stores. In a filing with the Securities and Exchange Commission, the company said that its digital channel is also expected to account for a higher proportion of sales.
As of Nov. 22, 2022, the company had a total of 949 stores, including 762 Bed Bath & Beyond stores in all 50 states, the District of Columbia, Puerto Rico and Canada; 137 Buybuy Baby stores; and 50 stores under the names Harmon, Harmon Face Values or Face Values.
Related: Bed Bath & Beyond’s debt woes puts nearly $6 billion in property bonds in focus
Bed Bath & Beyond’s stock has fallen 83.8% over the last 12 months, outpacing the S&P 500’s decline of 10.2%.
Additional reporting by Ciara Linnane.
Source: https://www.marketwatch.com/story/bed-bath-beyonds-lifeline-comes-at-incredible-cost-to-shareholders-analyst-warns-11675953782?siteid=yhoof2&yptr=yahoo
Bed Bath & Beyond’s lifeline comes at ‘incredible cost’ to shareholders, analyst warns
Bed Bath & Beyond Inc.’s equity offering may be a lifeline as the troubled retailer teeters on the brink of bankruptcy — but it could spell trouble for the company’s shareholders, according to Wedbush analyst Seth Basham.
After the bell Tuesday, Bed Bath & Beyond
-0.38%
BBBY,
said it had closed the sale of convertible preferred stock as well as warrants to purchase common shares and convertible preferred stock. The sometime meme-stock darling raised about $225 million in the sale, as expected, and is expecting to receive an additional $800 million in future installments, assuming certain conditions are met.
But Wedbush analyst Seth Basham warns that while Bed Bath & Beyond has bought itself time, shareholders could feel the impact. “Against the odds, [Bed Bath & Beyond] secured financing for as much as ~$1.125 [billion] of additional capital, reducing the near-term risk that it enters bankruptcy and buying it more time to execute its turnaround efforts,” he said in a note released Wednesday. “However, this lifeline comes at an incredible cost to existing shareholders who could see over 80% dilution from convertible preferred shares and warrants if fully executed.”
Now read: Bed Bath & Beyond making ‘last gasp’ to survive before filing for bankruptcy, says analyst, warning that the equity will eventually be wiped out
The analyst continued: “As we see a low probability that the company achieves its 2023 turnaround plan, we ascribe little-to-no value to the company’s equity on a probability-weighted basis. Failure to secure the additional $800 [million] and/or an unsuccessful turnaround in 2023 could put the company back on bankruptcy’s doorstep.”
Wedbush maintained its underperform rating for Bed Bath & Beyond but slightly increased its price target to 25 cents from zero.
Bed Bath & Beyond’s stock rose 8.4% before market open Thursday, after ending Wednesday’s session down 13.3%, outpacing the S&P 500’s
-0.88%
-6.29%
-6.78%
SPX,
decline of 1.1%. Fellow meme stock AMC Entertainment Holdings Inc.
AMC,
fell 7.4% on Wednesday, and GameStop Corp.
GME,
ended the session down 0.6%.
Also read: Bed Bath & Beyond leads meme-stock plunge as AMC and GameStop also tumble
Bed Bath & Beyond’s announcement last month that it may need to declare bankruptcy sent the company’s stock sinking toward a 30-year low and followed a turbulent few years marked by strategic missteps, cash burn, challenging underlying business trends and the impact of the COVID-19 pandemic. Bed Bath & Beyond also recently disclosed that it was in default on loans that were called in.
Bed Bath & Beyond also announced the closure of almost 130 stores on Jan. 10 as it attempts to resolve its financial woes. On Tuesday, the company announced “an ultimate operating goal” of 360 stores across the U.S., in addition to approximately 120 Buybuy Baby stores. In a filing with the Securities and Exchange Commission, the company said that its digital channel is also expected to account for a higher proportion of sales.
As of Nov. 22, 2022, the company had a total of 949 stores, including 762 Bed Bath & Beyond stores in all 50 states, the District of Columbia, Puerto Rico and Canada; 137 Buybuy Baby stores; and 50 stores under the names Harmon, Harmon Face Values or Face Values.
Related: Bed Bath & Beyond’s debt woes puts nearly $6 billion in property bonds in focus
Bed Bath & Beyond’s stock has fallen 83.8% over the last 12 months, outpacing the S&P 500’s decline of 10.2%.
Additional reporting by Ciara Linnane.
Source: https://www.marketwatch.com/story/bed-bath-beyonds-lifeline-comes-at-incredible-cost-to-shareholders-analyst-warns-11675953782?siteid=yhoof2&yptr=yahoo