As Bed Bath & Beyond Inc. plans for a $1 billion capital infusion, one analyst covering the stock says it will soon be worthless, calling the equity financing a “last gasp” before the company eventually files for bankruptcy protection.
(Bloomberg) — As Bed Bath & Beyond Inc. plans for a $1 billion capital infusion, one analyst covering the stock says it will soon be worthless, calling the equity financing a “last gasp” before the company eventually files for bankruptcy protection.
Bed Bath & Beyond tumbled as much as 48% to $3.07 on Tuesday, its worst drop ever, after posting a record one-day advance on Monday amid heavy trading volume. The stock had briefly triggered a volatility-related trading halt shortly after markets opened in New York on Tuesday.
The retailer, which has been preparing for a Chapter 11 filing, announced an offering of convertible preferred securities and warrants on Monday in a deal that could ultimately raise more than $1 billion. Bed Bath & Beyond has already gathered orders from institutional investors that would cover the full offering, Bloomberg reported on Tuesday, citing people with knowledge of the matter. The company earlier announced the pricing of the offering of preferred stock and warrants.
Even if Bed Bath & Beyond completes the transactions, “the additional capital provides the company with just a few more quarters of room to turn around its operations,” Wedbush Securities analyst Seth Basham wrote in a research note on Tuesday. He cut his price target on Bed Bath & Beyond to $0 from $1 and reiterated his underperform rating on the stock. Basham didn’t immediately respond to a request for further comment. Last month, KeyBanc Capital Markets said Bed Bath & Beyond shares were only worth a dime.
Read more: Bed Bath & Beyond Has Nothing But Itself to Blame for Downfall
Bed Bath & Beyond, which attracted the attention of meme-stock traders in early 2021, has been volatile since the start of the year when the company indicated it was preparing for a potential bankruptcy filing. Shares had surged by a record 92% on Monday as of the close.
Read more: FOMO-Inducing Meme Shares Are Losers in Long Run: Taking Stock
Basham sees a “low probability” that the company will be able to raise equity.
“In the event the transactions are successful, Bed Bath & Beyond common shares could rise as they are trading like options on the company’s survival,” Basham wrote. “But the ultimate value would be undermined by this highly dilutive offering of preferred stock that would have priority over the common shares.”
Bed Bath & Beyond has zero buy, two hold and 11 sell ratings after Odeon Capital Group became the latest firm tracked by Bloomberg to downgrade its recommendation on the shares. The average 12-month price target is $1.77, implying 70% downside from Monday’s closing price of $5.86.
(Updates to move stock plunge on Tuesday higher in the story.)
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