Bed Bath & Beyond (BBBY.US) has announced a public offering of shares in hopes that the decision will help it avoid bankruptcy and raise more than $1 billion to pay off its debts. The company's stock as a so-called 'meme stock' has attracted a lot of interest from Wall Street speculators in recent years due to squeezing out 'short positions' on shares of the 'undervalued' company. However, its financial condition is looking worse and worse. The company has defaulted on some of its financial obligations to JP Morgan, is struggling with increasing competition and record low consumer demand:
- In August, the company unveiled a turnaround plan that included closing 150 stores, cutting costs and laying off employees, but even implementing such a strategy requires cash, which Bad Bath Beyond does not have. In the summer, the company secured $500 million in financing and a $375 million loan from Sixth Street and a line of credit from JP Morgan. Since then, however, it has been unable to noticeably improve its business;
- In early January, the company warned investors that bankruptcy was likely if it failed to raise money after disappointingly low sales during the holiday season. The retailer pointed out that sales in the run-up to 'Black Friday' accounted for just 33% of the 2021 result.
- A person familiar with the matter told Bloomberg that the company has already found investors willing to help deal with its difficult financial situation, which at least temporarily dismissed the bankruptcy filing.The future, however, remains highly uncertain in the face of a further drop in inflation, indicating a marked decline in consumption.
Chart of Bed Bath Beyod (BBBY.US), W1 interval. The SMA200 (red line) and SMA100 (black line) averages are again approaching an intersection that will potentially form a bearish 'death cross' formation. Source: xStation5
