One of the stocks that’s been making constant headlines in recent days is Bed Bath & Beyond (NASDAQ:BBBY). This former meme stock has raised eyebrows this week over its debt-to-equity swaps, which saw a significant number of shares issued to pay back a portion of the company’s senior secured debt. Today, there’s another key update that’s driving more volatility with BBBY stock.
Recent Securities and Exchange Commission (SEC) filings show two of the company’s executive vice presidents sold shares last week. While these share sales appear to be rather immaterial (totaling around 1,500 shares combined for a value of less than $5,700), it’s the latest development that may make investors nervous.
In general, insider selling activity is not a positive signal for any stock. Insiders who are bullish on a company’s trajectory generally want to hold onto their options, capitalizing at a much higher price. That said, insider sales can take place from time to time for personal reasons. Thus, it’s somewhat of a difficult metric to use as a signal, particularly when the sales are so small in size.
With that said, let’s dive into what to make of the recent news around Bed Bath & Beyond.
Is Now the Time to Bail on BBBY Stock?
Normally, significant insider selling activity is worrisome for investors. While the moves released today via filings do signify sales took place, the rather insignificant amounts sold don’t really tell an extremely bearish picture. Thus, perhaps it’s unsurprising to see BBBY stock trading relatively flat today.
That said, the equity issuances the company has taken on over the past two weeks are more concerning. Considering how low Bed Bath & Beyond’s valuation already is, issuing shares at this level is not advantageous to investors. Indeed, the dilution that comes along with these issuances could impact long-term gains.
That said, considering the company’s debt position, perhaps these moves are for the best. For those concerned about this company’s prospects, limiting its debt burden could be the way to go. Right now, I view BBBY stock as an option on how the underlying company performs in the near-term. This is a risky bet, insider sales or not.
On the date of publication, Chris MacDonald did not have (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.
