Bed Bath & Beyond (NASDAQ:BBBY) rose overnight on hopes it may be able to address its debt. Other former meme stocks, like Gamestop (NYSE:GME) and AMC Entertainment (NYSE:AMC), were also up overnight.
BBBY stock gained 2% on a Bloomberg report that creditors are organizing bondholders who hope to avoid a bankruptcy. The debt was downgraded Oct. 7 by Moody’s over concerns about a possible default.
The stock is down 26% since the passing of Chief Financial Officer Gustavo Arnal in early September. The company then reported a huge loss for the August quarter, with sales down 28% from a year earlier.
BBBY stock opened Oct. 12 at $5.02 per share with a market capitalization of about $405 million.
What Lies Beyond?
Board member Sue Gove has been trying to steady the ship since late June, when she was named CEO and former Target (NYSE:TGT) executive Mark Tritton was let go. But she inherited considerable debt and liabilities with just $108 million of cash on the balance sheet.
While BBBY and other meme stocks exploded in 2021 on short squeezes, bear attacks this year have been successful. Investors who sought to play the short squeeze game have been left holding losses.
Gove found more than $500 million in new loans and announced the closing of 56 stores in August. She also sought to reorganize the debt against bondholder resistance.
Suppliers are reluctant to ship to retailers in danger of default, fearing they could be hit by losses in bankruptcy. By dropping BBBY’s rating to C, its lowest level, citing a “very high likelihood of a default over the next twelve months,” Moody’s hit the company’s reputation with both suppliers and customers.
What Happens Now for BBBY Stock?
If Gove can stave off bankruptcy this holiday season, she’s still not out of the woods.
A bleak Christmas selling season and a recession in 2023 are on the horizon, according to analysts. Assets like BBBY’s Buybuy Baby business are worth less than they were. Analysts fear Bed, Bath may be going beyond anyone’s efforts to save it.
On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
