Bed Bath & Beyond (NASDAQ:BBBY) defaulted on its loans and banks cut its credit lines. BBBY stock fell 20% and the company looks headed toward bankruptcy.
BBBY was opened at $2.54 per share on Jan. 27. That’s a market cap under $300 million despite more than $6 billion in trailing 12-month revenue. Since its meme stock heyday two years ago, shares are down 92%.
Circling the Drain
Interim CEO Sue Gove was unable to engineer a merry Christmas for the home goods retailer, leaving the company with few options.
InvestorPlace writers have been warning readers about this all year. Despite efforts to engineer a short squeeze and rumors that a buyer might emerge, the company’s fate has been clear for some time.
With suppliers refusing to deliver goods except for cash, stores are becoming empty shells. The company finally delivered its 10-Q for the quarter ending in November and it’s a horror show. Cash was down to $153 million and the current portion of its long-term debt, which must be paid or refinanced, stood at $909 million.
A default notice from JPMorgan Chase (NYSE:JPM) means bankruptcy could be the only way to protect what assets remain. The default notice means the interest rate on Bed Bath & Beyond’s loans rise and it must put up cash collateral to get letters of credit before suppliers deliver goods.
Gove tried to sell the company’s previously profitable Buy Buy Baby chain and 130 stores are being closed, but the rest are now under imminent threat.
There were still traders on social media boosting the stock Friday morning, but others saw insiders selling and said it’s time to leave.
What Happens Next for BBBY Stock?
A bankruptcy filing could come as early as today. It should have been done weeks ago to protect assets for creditors and allow an orderly sale. As things stand, I believe it’s possible Bed Bath & Beyond could be headed toward a Chapter 7 liquidation rather than a Chapter 11 reorganization.
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.