Bed Bath warns of bankruptcy risk in $300m equity offering

BLOOMBERG

Reeling from a collapse in its stock price and at the mercy of Wall Street banks, Bed Bath & Beyond Inc warned it will
likely go bankrupt if a last-gasp $300 million equity offering fails.
The retailer filed to sell new shares to stay afloat and repay creditors after a hedge-fund rescue effort faltered and as day traders — famed for bidding up unprofitable companies — flee. If the offering “is not fully consummated,” the company said, “we expect that we will likely file for bankruptcy protection.”
The troubled firm was close to going bust earlier in the year but secured an 11th-hour rescue from Hudson Bay Capital Management — which agreed to provide more than $1 billion as long as the retailer’s share price didn’t plunge below below $1.25 or $1.50, depending on the timing.
With the stock trading far below those levels, the deal with Hudson Bay is no more. That’s put Bed Bath on the brink of liquidation, giving banks including JPMorgan Chase & Co the upper hand.
Bed Bath would first send all net proceeds from the share sale to its lenders on Wall Street, the filing said. If it raises enough funds, the retailer would then focus on buying merchandise to stock its shrinking fleet of stores.
“The actions we’ve taken have enabled us to create the necessary financial runway to begin restoring our iconic Bed Bath & Beyond and Buybuy Baby businesses,” Chief Executive Officer Sue Gove said in a statement.
The latest deal arranged by
B Riley Securities, known as an at-the-market offering, has the advantage of raising funds faster than the agreement with Hudson Bay — in theory. Yet retail traders, who turned the company into a meme stock last year, are rushing for the exits. The cohort have sold more than $2 million worth of stock, data from Vanda Securities show — a retreat from last summer when the group poured in millions.
“Even if Bed Bath can miraculously remain a going concern, we don’t think there’s an opportunity for shareholders to find return in the stock,” says Jaime Katz, an analyst at Morningstar who sees the shares worth $0.
The retailer also faces mounting operational challenges that make an eventual bankruptcy filing likely, according to analysts, investors and some of the firm’s suppliers. Revenue is plummeting after many shoppers turned their backs on the company following a failed pivot to bolster its private-label offering.
“At first glance, it seems unlikely this will be enough for them to avoid an eventual bankruptcy,” said Dennis Cantalupo, CEO of Pulse Ratings, a credit-rating and consulting firm. “But they are certainly leaving no stone unturned. Additional capital will provide them some time, but they need to change the trajectory of operations to remain a viable retailer.”
The retailer said it’s on pace to have 360 Bed Bath & Beyond stores by the end of April — less than half of what it had in the
autumn — and 120 Buybuy Baby shops.