BBBY Stock: Latest Survival Moves Don’t Alter the Bear Case

Bringing back memories of the meme stock craze, stocks of Bed Bath & Beyond (NASDAQ:BBBY) almost doubled in retail on Monday. Since then, however, the stock has given back all of its gains, and then some.

Facing the prospect of bankruptcy, the struggling retailer announced a share offering on Monday that it hoped to raise around $1 billion. The Company expects initial gross proceeds of approximately $225 million, with an additional $800 million from issuance of securities obligating holders to purchase convertible preferred stock “in future installments, subject to certain conditions.” If the transactions don’t go through, the company said there is a high probability it will file for bankruptcy.

Investors apparently heard the news and turned away in droves. Hardly a surprising turn of events, says Baird analyst Justin Kleber.

“While this type of complex and creative financing is not our area of ​​expertise, one thing is certain: BBBY common shareholders will be significantly diluted by this transaction (potential for 900 million shares outstanding vs. 117 million at the end of the third quarter),” the analyst stated. “In short, it looks like BBBY has a de facto ATM offering worth $1 billion.

At the same time, the company announced that it has appointed a new interim CFO, Holly Etlin, a partner at Alix Partners, a firm that uses BBBY for advisory services.

Additionally, just a week after the retailer announced it would be closing 87 locations, BBBY announced it was closing an additional 150 Bed Bath stores. The actions will change little in the narrative, says Kleber. “While the closure of underperforming sites should lead to improving fundamentals, all else being equal, BBBY’s forecast for FY23 fundamentals turnaround looks overly optimistic,” the analyst said.

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All in all, Kleber rates BBBY stock as an Underperform (i.e., Sell) along with a price target of $1, suggesting the stock is ~61% below current levels. (To see Kleber’s track record, click here)

None of this comes as a big surprise to us, however. TipRanks’ stock analysis engine has long expected BBBY to “underperform,” based largely on the consensus of seven verified analyst reviews who collectively rate the stock as a “strong sell.”

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is for informational purposes only. It is very important that you do your own analysis before making any investment.


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