Bed Bath & Beyond Inc. is testing the loyalty of its most ardent retail investors with plans to sell new shares as the roller coaster that is its stock price lurches downhill.
(Bloomberg) — Bed Bath & Beyond Inc. is testing the loyalty of its most ardent retail investors with plans to sell new shares as the roller coaster that is its stock price lurches downhill.
The home-goods retailer on Wednesday filed to sell up to 12 million common shares as part of a move to enhance liquidity as it fights to survive. The plan comes after the stock plunged 70% from an August high when activist investor Ryan Cohen dumped his investment and made off with millions.
The new offering was part of a financing overhaul praised by analysts as an effort to buy the struggling company a bit of time while it seeks to revamp its offerings amid plummeting sales. Still, the retailer’s flailing revenues are likely to make traders more than a little cautious about piling into the stock. Shares have fallen 27% in the two days since the announcement.
“Bed Bath & Beyond has enhanced its liquidity position and is making more aggressive cuts to align its cost structure with the lower sales level,” Telsey Advisory Group analyst Cristina Fernández wrote in a note. “But there has been no positive change in direction in its sales trend in recent months.”
Now, Bed Bath & Beyond faces a crucial holiday season with the overwhelming majority of analysts recommending investors sell the stock. The average 12-month price target implies additional downside of 46% from Thursday’s $8.82 level.
The company “may have saved itself from a restructuring scenario,” said Joseph Acosta, partner in the bankruptcy practice at law firm Dorsey & Whitney. “But if the holiday season does not go well or their capital raise does not produce the anticipated results, we might be talking about reorganization again in the late fall or early spring.”
It’s a playbook that’s been replicated often over the past two years as the speculative mania born from no-fee brokers and social-media chatrooms offered life to struggling firms. However, when other retail-trader favorites pushed shares onto investors, global markets were in a much more stable place.
GameStop Corp. raised more than $1 billion by selling shares in an at-the-market offering offering program last summer when the S&P 500 Index was at a record high. AMC Entertainment Holdings Inc. sold more than 200 million shares from the end of 2020 through the first half of last year as retail traders flocked to the struggling movie-theater operator. Beleaguered retail company Express Inc., which was caught up in the meme stock craze, tapped the historically unusual strategy of selling shares directly into the open market last summer.
The difference for Bed Bath & Beyond is that it’s selling into a renewed slump in its stock price in the past two weeks.
Still, the company is likely to find support from retail investors. Despite the wild ride in so-called meme stocks, a recent MLIV Pulse survey showed the phenomenon is here to stay.
Read more: Meme Stock Mania Will Live On Despite Wild Swings: MLIV Pulse
Retail traders snapped up a record $337 million of Bed Bath & Beyond shares in August, data from Vanda Research show, with touts on internet forums spiking.
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