Business

Bed Bath & Beyond (BBBYQ) shareholders held back “worthless shares”.

  • Without a rebound, the company’s $152.25 million market cap is effectively zero for common shareholders.
  • In its April filing with the SEC, the company warned that trading its shares during ongoing Chapter 11 proceedings “is highly speculative and involves significant risks.”

The Bed Bath & Beyond logo is seen at the store in Williston, Vermont on June 19, 2023.

Jakub Porzycki | Nurphoto | Getty Images

Bed Bath & Beyond stock continues to trade at massive volumes, even as the wildly popular meme stock appears to be just weeks away from being declared worthless.

More than 15 million transactions took place on Aug. 16, according to Nasdaq data in shares of the struggling home retailer, which filed for Chapter 11 bankruptcy in late April and has begun closing its brick-and-mortar stores in recent months after multiple fundraising efforts failed to keep the company afloat.

Its intellectual property was acquired at auction by Overstock, which acquired the Bed Bath & Beyond brand and relaunched the business as an online-only retailer earlier this month. There are also plans to take over the company’s stock ticker and change the current OSTK to BBBY in hopes of capitalizing on the long-established name. The original company’s physical stores will be closed and its assets liquidated.

In its April filing with the SEC, the company warned that trading its shares during ongoing Chapter 11 proceedings “is highly speculative and involves significant risks.”

“The trading prices of the Company’s securities may have little or no connection to the actual recovery, if any, by the Company’s securities holders in the Chapter 11 cases,” said Bed Bath & Beyond.

“The Company anticipates that depending on the outcome of the Chapter 11 cases, holders of the Company’s common stock could suffer a substantial or complete loss of their investment.”

In its subsequent bankruptcy plan, released July 20, the company confirmed that “upon the full and final satisfaction of all allowable interests in BBB, all allowable interests in BBB will be nullified, released and extinguished and have no further force or effect.” and no holder of shares in BBB will be entitled to any reclaim or distribution under the Plan as a result of such shares.”

Without a rebound, the company’s $152.25 million market cap is effectively zero for common shareholders as they lag behind several tiers of bondholders in the redemption chain and lack a vote on the plan.

The company’s scheduled confirmation hearing will take place on September 12, but there has been no positive impetus for the company’s recent stock purchases.

Activist investor and GameStop Chairman Ryan Cohen stirred optimism last year when he hinted that the successful Buy Buy Baby unit could potentially be worth $1 billion, but no qualifying bids materialized and Dream On Me eventually acquired baby segment intellectual property assets for just 100% $15.5 million.

This would suggest that the current large number of investors trading the company’s shares may only be doing so due to doomed speculation and being left empty-handed.

Bed Bath & Beyond stock is down more than 91% since the turn of the year to close Wednesday at $0.21 a share. Though the timing of the common stock deletion is yet to be confirmed, it looks like retailer investments will go down the drain.

“Our society has chosen to be far less regulated in hopes of perfecting humanity. Meme stock trading, drug use and gambling all fit into this scheme,” Cole Smead, CEO and portfolio manager at Smead Capital Management, told CNBC.

“It’s causing disruption among users, but we look the other way because government or corporations can benefit from it. We allow people to degenerate and don’t care about the effects. We wonder why our urban areas are being permanently damaged as people flee to less dense places. They are fleeing destruction.”

Overstock “oversold”

Overstock shares closed Wednesday at $24.22 per share, down 44% from the $37.86 per share peak in early August. However, the year-to-date increase is still 25%.

Michael Pachter, chief executive officer of equity research at Wedbush Securities, told CNBC on Wednesday that since the rebrand rolled out earlier this month, there has been a spike in downloads of the Bed Bath & Beyond app, with the app moving up from the bottom half moves 100 download list in upper quartile.

Pachter, who oversees the stock, said the download rate shows that Bed Bath & Beyond’s brand awareness is conducive to Overstock and that shares are now “oversold.”

“The stock appreciation was driven by optimism that the rebranding would increase sales, and we don’t have any data to definitively back that up. Investors will have to wait a quarter or two to see if OSTK is reporting revenue growth but app download activity is “encouraging,” he said.

Regarding the original BBBYQ stock (where the Q indicates it is currently in bankruptcy proceedings), Pachter noted that the company’s debts exceeded its assets even after Overstock deposited $21 million.

“BBBY shareholders will likely be left with worthless shares. Retailers are probably hoping there will be more asset sales, but I’m not sure there’s anything else of value to sell,” Pachter added.

Source: www.cnbc.com

Show More

Robert Wilson

Business & economics analyst. Breaking down intricate financial trends for informed decision-making.

Read Next

Back to top button