Bed Bath & Beyond stock hits record low as company teeters on bankruptcy
Bed Bath & Beyond (BBBY) shares closed at a record low on Thursday as the company said its last hope for survival may rely on a reverse stock split.
The move would consolidate the number of existing shares, thereby increasing the value of each share.
“A failure to obtain shareholder approval for the Reverse Split Proposal will likely force us to file for bankruptcy,” the company said in an SEC filing.
Bed Bath & Beyond’s “special meeting” for shareholders to vote on a reverse stock split in the range of 1-for-10 to 1-for-20 split is scheduled for Tuesday, May 9, per the filing. The meeting comes after months of store closures, various searches for new rounds of funding for the embattled retailer and most recently, a lifeline to help pay vendors.
Bed Bath & Beyond shares have fallen more than 98% over the last year and closed Thursday’s trading session at its lowest price ever: $0.31.
Even if the company votes to boost the stock price, there’s no guarantee the retailer can recover. Kate McShane, the lead retail analyst at Goldman Sachs, says replacing inventories to reinvigorate sales growth will be the key focus of any funding Bed Bath & Beyond receives.
In the most recent quarter, Bed Bath & Beyond reported inventories declined nearly 25% year-over-year as revenue fell 33%.
On Thursday, the company announced a vendor consignment program to help ease concerns. The $120-million line of capital will be deployed to “key suppliers to supplement inventory levels already sold at Bed Bath & Beyond and buybuy Baby,” according to the release.
“Having inventory and having the right inventory will help them,” McShane told Yahoo Finance Live. “I think the question is just in this environment where you do have a consumer that’s a little bit more thoughtful about their spending exactly what it will yield for someone like Bed Bath & Beyond."
Making the stock ‘more attractive’
Bed Bath & Beyond recently ended its roughly $1 billion funding deal with Hudson Bay Capital management. Part of the funding deal included monthly stock buys from Hudson Bay Capital that came at a market discount.
On March 30, Bed Bath & Beyond announced the deal had been terminated and said it would enter into a new funding program with B. Riley Principal Capital.
The stock price is still seen as a key source of liquidity to the company, which noted in its most recent filing that increasing the price per share with a reverse stock split would “help increase broker interest."
“We believe a higher share price could make our Common Stock more attractive to a broader range of investors, as we believe that the current market price of our Common Stock may affect its acceptability to certain professional investors and other members of the investing public,” the company said in the filing.
As Bed Bath & Beyond teeters on failure, the company laid out what that could mean for investors.
“Holders of our Common Stock would not receive any recovery at all in a bankruptcy scenario,” the company said.
Josh is a reporter and producer for Yahoo Finance.
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