Bed Bath & Beyond shares plummet 24% after filing to sell shares

Bed Bath & Beyond (BBBY) shares fell as much as 24% after the struggling retailer announced it would sell up to $300 million worth of stock. If the share offer is not completed in full, the company says it expects an application for insolvency protection filing.

Bed Bath & Beyond also released its preliminary fourth-quarter sales results, missing analysts’ expectations. Net sales of $1.2 billion were below Wall Street’s estimate of $1.43 billion. Comparable sales declined 40-50% in the three months ended February 25th.

Net proceeds from the announced stock offering will be used for initiatives such as “stock investments further supported by a realigned store footprint and cost structure.”

“The actions we have taken have allowed us to provide the necessary financial runway to begin the recovery of our iconic Bed Bath & Beyond and Buybuy BABY businesses,” said Sue Gove, President and CEO of Bed Bath & Beyond, in a statement.

In February, the struggling homewares retailer announced an agreement with hedge fund Hudson Bay Capital Management to secure $1.025 billion in financing through an equity offering. This step was seen as Hail Mary Pass to stay in business, which takes the stock down more than 40% in one day.

In Thursday’s announcement, the company said it was ending its previous stock offering. Hudson Bay Capital has divested its Bed Bath and Beyond deal as the hedge fund became increasingly concerned about the low share price ahead of its next round of funding in early April, according to a source.

Bed Bath & Beyond’s new investor, B. Riley Securities, is making its payments weekly instead of the monthly installments that Hudson Bay Capital was paying. This will bring in capital to Bed Bath and Beyond more quickly to replenish stocks.

A Bed Bath & Beyond store is located in Paramus, New Jersey on Monday February 6, 2023. Signs indicate that the store will soon be closing permanently and all items are on sale with a 10 percent discount. (AP Photo/Ted Shaffrey)

Bed Bath & Beyond has been a favorite of meme stocks for the past few years. The company is considering a 1:5 or 1:10 reverse stock split. The split would boost the value of shares and potentially reignite retailer interest in the stock. According to data from S3 Partners, the short yield on the stock is incredibly high with more than 62% of the free float.

Ines is Senior Business Reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre

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