Bed Bath & Beyond, one of the most famous chains in the United States, dedicated to the sale of household products, is getting closer to declaring bankruptcy.
The last of his moves to avoid it, raising regarding $1 billion in a stock offering, looks set to backfire.
The additional capital would offer the struggling home goods chain a short window of just a few quarters to revive the business, Wall Street analysts said, adding that in the current economic climate it would lessen any chance of a successful turnaround.
“Unfortunately, we see a low probability that the company will be able to raise capital and see this as a ‘last gasp’ before filing for bankruptcy,” said Seth Basham, an analyst at Wedbush.
Brutal ups and downs
This has caused its shares to sink more than 40% this Tuesday. Some actions that are living a real madness since on Monday they had risen 92% driven by the purchases of small investors, still attracted by what has been called ‘meme actions’.
In fact, as part of that phenomenon that became so popular in 2022, Bed Bath & Beyond shares skyrocketed 400% and reached as high as $30 in August, when activist investor Ryan Cohen took a stake in the company. and pushed for changes. He then sold the stake and the shares plummeted once more.
At this time, the company’s shares are in a very difficult situation since, according to data compiled by S3 Partners, 53% of them that are listed on the market have a short positionan investment strategy in which you bet on the fall of the shares.
A plan that didn’t work
Bed Bath & Beyond has been trying to conserve cash as it teeters on the brink of bankruptcy following racking up more than $1 billion in debt and losses by the end of 2022. Indeed, the company acknowledged in a recent regulatory filing that it received notice of JPMorgan’s default and that you do not have adequate funds to repay your loans.
To address declining sales, declining cash and a debt burden, Bed Bath & Beyond implemented a strategy focused on private label products in 2022. Since then, the retailer’s management has backtracked and has set out to incorporate national brands.
“The turnaround plan put in place last year is not working. (…) Put bluntly, the business is moving fast in the wrong direction, with bankruptcy the most likely destination,” said Neil Saunders, an analyst at GlobalData.
The meme actions continue to play
Meme stocks have generally rallied over the past month, with high levels of trading reminiscent of the “meme craze” of 2022.
GameStop is up 29% year-to-date and AMC shares are up 68% since the start of 2023. AMC’s trading was briefly paused on Monday due to volatility as shares rose as much as 19 %.
Investors have taken a risk-on approach over the past month, with AI-related stocks joining beaten-up tech names as the biggest gainers, in addition to 2022 meme stocks.
