Can Finance Wake Up Bed Bath & Beyond As Even Meme Stock Traders Lose Interest?

How do you make a small fortune in retail? Start with a large one.

Its a maxim that meme stock investors watching values decline since the $225 million lifeline for Bed Bath & BeyondBBBY
(BBBY), and the finance providers led by hedge fund Hudson Bay Capital Management, would do well to remember.

Both have made their bed, the bigger question is — after a disastrous two weeks since that financial injection — whether they should still lie in it?

The money — a quick fix to prevent Chapter 11 bankruptcy and give management headroom to dig themselves out of a hole — was engineered to allow new investors to profit only if the stock holds above 71.6 cents. So they get significant upside, but only so long as the retailer does not keep sliding

However, rather than spurring a fresh wave of optimism about the company’s prospects, opportunist individual investors who piled in last summer when the stock traded above $20 are now looking with dismay at Thursday’s $1.51 close.

That in turn is significantly down on a brief rally driven chiefly by day traders which saw a 2023 peak of $4.87 on Feb. 6. when BBBY briefly led a meme stock rally, only to crash back through the floor…and beyond, toward the three-decade low of, symmetrically, Jan 6.

Even those who trade on the edge appear to be abandoning mission.

Finance Structure For BBBY

To refinance, the structure BBBY chose was to sell convertible preferred stock as well as warrants to purchase common shares and convertible preferred stock.

The company had hoped to raise more than $1 billion, pointing to an additional approximately $800 million upside of “gross proceeds through the issuance of securities requiring the holder thereof to exercise warrants to purchase shares of Series a Preferred Stock in future installments assuming certain conditions are met.”

It duly received investor commitments to raise $225 million of equity capital initially, with the rest to follow, according to those with their ear to the ground.

In a SEC filing, Bed Bath & Beyond disclosed that JPMorgan ChaseJPM
& Co. and other creditors had agreed to work with it if the retailer could raise the money after it disclosed late January that it was in default on called-in loans. BBBY also acknowledged a delisting notice because of a late quarterly filing, subsequently posted.

In the meantime, Holly Etlin, who works for AlixPartners, has been installed as the new CFOCFO
, replacing Laura Crossen, who will resume her role as chief accounting officer and SVP of finance.

However, Bed Bath & Beyond’s share stock also reflects a shifting landscape for meme stock traders who had used social media to game shares in ailing businesses such as AMC and Gamestop and, thanks to billionaire Chewy CEO Ryan Cohen’s intervention summer past, BBBY.

That enthusiasm appears to be waning. Over the past two weeks retail traders have sunk approaching $50 million into BBBY stock, according to data from Vanda Securities. However, that is way off the $73 million they snapped up in a single day in August 2022.

Meme Stocks Shfting Position

That might in part be due to previous adventures. Gamestop’s share value continues to wade through treacle, while AMC EntertainmentAMC
Holdings Inc. shareholders have filed a lawsuit in Delaware accusing the movie theater chain of bypassing them in a bid to increase the number of shares.

Of course the key for Bed Bath & Beyond is whether it has an actual recovery strategy. One of its first steps is to close all 54 of its Canadian stores, which are currently liquidating inventory through April, at which point it will exit the market.

In the U.S. it needs to address supply chain issues, wean itself off constant promotions and remerchandise to attract shoppers to its stores and online platform.

Addressing its immediate financial priorities, the retailer also announced a Special Record Date of Feb. 27 for payment of interest due on a number of Senior Notes.

President & CEO Sue Gove said: “Building on the transformative equity financing, we continue to work on improving our financial position and optimizing value for all our stakeholders. We remain focused on utilizing our current and future financing to execute our turnaround plans and restore our position with customers.”

Right now meme stock fans appear to have hit the snooze button on BBBY, but the deeper question is whether the retailer can wake itself up.