Bed Bath & Beyond (NASDAQ:BBBY) stock is falling more than 6% today on shareholder dilution news. This comes after an already highly volatile month. Not long ago, the home furnishing retailer shot to market prominence after seeing a meme stock surge that mimicked GameStop’s (NYSE:GME) 2021 short squeeze. Since then, though, BBBY stock has been plunging on several negative catalysts.
Today, the company’s latest plan is to reduce its excessive debt. But that is sending shares down even more as investors scramble to jump ship before dilution hits.
Let’s take a closer look at the news pushing BBBY stock down and what investors should be watching for.
What’s Going on With BBBY Stock?
Two days ago, Bed Bath & Beyond announced a plan to issue 11.7 million shares of BBBY stock. The company stood to eliminate $123 million worth of debt through the plan, but the market did not react well.
It’s not hard to see why. As InvestorPlace‘s Eddie Pan notes, issuing this stock would dilute the value of existing shares. For current shareholders, that’s a less-than-ideal scenario.
Today, things took a turn for the worse when Bed Bath & Beyond submitted an 8K filing confirming plans to extend its previous exchange offers for all outstanding senior notes. This news has pushed BBBY stock down more than 6% for the day. A rebound does not seem likely, either.
In a statement released by the company, CEO Sue Gove discussed Bed Bath & Beyond’s plans for the future:
“We look forward to building additional momentum with our bond exchange and providing an opportunity for our interested holders to participate. We believe the degree of engagement we have experienced to date will help us address the maturity of our debt, to strengthen our financial position and further enable our current and future business priorities.”
That may be true, but not all company insiders are so optimistic. Yesterday, another filing with the U.S. Securities and Exchange Commission (SEC) showed that two executive vice presidents offloaded BBBY stock last week. Although the number of shares sold totaled less than 1,500, this kind of development can certainly make investors nervous.
Judging by BBBY stock’s performance since, it’s safe to say shareholders aren’t happy with the company. Even if its move to eliminate debt proves effective in the long term, investors may not want to wait and ride out the storm.
The Bottom Line
Bed Bath & Beyond has given shareholders no cause for optimism over the past few months as shares have plunged steadily downward and bad news continues to pile up. Since its August peak, BBBY stock has lost more than 85% of its value. Not long ago, InvestorPlace contributor Thomas Niel said investors should avoid the penny stock at all costs:
“Even if the company avoids Chapter 11, the shareholder dilution that could result from debt exchanges and secondary offerings could keep pushing shares to lower prices.”
The way it looks from here, Bed Bath & Beyond is caught between a rock and a hard place. And unlike some peers, it won’t be saved by its meme stock status.
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On the date of publication, Samuel O’Brient 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.
