The newsrack instagram3/28/2023 ![]() ![]() Though my Profit & Protectionsystem continues to see BBBY as a potential turnaround (and 100%-plus spikes will almost certainly happen), longer-term investors are better off staying away from this inevitable bankruptcy.This is a regular feature of the blog looking at the various iPhone Apps available. ![]() In an ideal world, Bed Bath & Beyond would have simply declared bankruptcy, restructure its debts, and only then attempt to save its business. BBBY’s deal with Hudson Bay also forces the retailer to continue running its cash-burning business, rather than liquidate operations and save what assets remain. Its last-minute dealing with Hudson Bay gave the retailer enough cash to repay missed interest payments and keep the lights on… but not enough to embark on a meaningful turnaround plan. The company’s popularity among retail investors meant that management still had a chance to raise the billions it needed (not just $1 billion from Hudson Bay) to right the ship.īut four short weeks later, BBBY is now on an even more certain path toward irrelevance. Last month, I noted how Redditors might have saved Bed Bath & Beyond from bankruptcy… if only they kept shares above $25. Rising solvency concerns have pushed them over the edge. Vendors were already wary of the retailer’s dealings before this latest mess. My kitchen-related spending spree is obviously over.īut Bed Bath & Beyond is in particularly bad shape because of its poor relations with its suppliers. Even Wayfair (NASDAQ: W), an online furniture retailer, recently announced it was laying off another 10% of its workforce last month. Container Store Group (NYSE: TCS) - long considered the gold standard in the home goods industry - has failed to generate meaningful cash flow since 2021. Other home goods retailers are also facing the pinch. Exercising the common warrants alone would increase BBBY’s share count from 117 million to well over 210 million… and push shares dangerously close to under $1 in the absence of a reverse split. In total, 23,685 convertible preferred shares, 84,216 preferred stock warrants and 95.4 million common stock warrants were issued. The most obvious issue to external shareholders is the newly dilutive effect of Hudson Bay’s shares. That leaves every stakeholder in relative limbo. Hudson Bay’s new shares also have a conversion floor of around 71.6 cents, meaning that the investment firm will start to lose money if it dumps shares too quickly. A similarly hyperactive market for meme stock Mullen Technologies (NASDAQ: MULN) has failed to keep shares of the electric vehicle firm above the exchange-mandated $1. BBBY’s unusually high trading volumes also do not guarantee a willing buyer’s market. ![]() Bed Bath & Beyond’s $180 million market capitalization means Hudson Bay will struggle to offload its initial stake ($237 million face value), never mind the $800 million it may eventually invest. Of course, the real world will never guarantee such a risk-free return. By one calculation, Hudson Bay could have theoretically turned around and sold its convertible shares for a 14% return the following day. In exchange for a pile of cash, Bed Bath & Beyond issued Hudson Bay exceptionally generous terms on preferred convertible shares. The unusual financing deal was actually quite straightforward. Yet, the retailer remains on track to lose it all when the money eventually runs out and the landlords come knocking. Bed Bath & Beyond has delayed bankruptcy by perhaps a financial quarter… or even a year. News outlets would later report that investment firm Hudson Bay had agreed to pump $225 million into the home goods retailer, with the promise of an additional $800 million over time, assuming “certain conditions are met.” (Even my former landlord was clearer about the security deposit).Ī deeper look into the terms of the unusual financing deal paints a stark picture. BBBY shares would almost double in the trading session, delighting the meme investors who follow the stock. 6, rumors of a last-minute equity deal would briefly stem the tide. Even algorithms can have trouble identifying dying businesses. ![]() No matter how low shares go, any near-term surge predicted by my Profit & Protectionsystem would eventually turn into a dead cat bounce. I’ve long warned about buying Bed Bath & Beyond (NASDAQ: BBBY) stock. InvestorPlace - Stock Market News, Stock Advice & Trading Tips ![]()
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