Bed Bath & Beyond (NASDAQ:BBBY) stock dropped 10% in premarket trading to about $3.44 per share after traders learned it failed to file its results for the November quarter with the Securities and Exchange Commission (SEC). Failure to file the 10-Q report on time means BBBY stock is out of compliance with Nasdaq regulations.
It’s just the latest embarrassing twist in the home goods retailer’s saga as interim CEO Sue Gove tries to stave off bankruptcy.
What’s Wrong Now?
Bed Bath & Beyond disclosed the problem in an 8-K filing, admitting to the threat of delisting and saying it “plans to file its Quarterly Report as promptly as possible to regain compliance with the Listing Rule.”
BBBY gave what now seem to be preliminary results to traders and the press on Jan. 10. They showed a loss of $393 million, or $4.33 per share, on revenue of $1.26 billion.
On Stocktwits, opinions were sharply divided. One trader estimated BBBY will have less than $200 million in cash by February while facing a cash burn rate of $139 million per month. Others continued to hope a short squeeze will lead to a profit.
The most likely conclusion is either Sycamore Partners or Authentic Brands will buy BBBY out of bankruptcy, with Sycamore looking to cut costs at the stores and Authentic seeking to maximize online sales. A release from its Buy Buy Baby unit seemed to echo language used by Sycamore.
Discussions at Reddit’s r/WallStreetBets are likely to be halted, as the market capitalization has been under $500 million for several days. Moderators have been removing some bullish posts. Most interest seems to lie in the stock’s options, with prices rising on bets the stock price goes lower.
What Happens Now for BBBY Stock?
The eventual failure of Bed Bath & Beyond was clear once the market learned Authentic and Sycamore were prime bidders for the company. Both specialize in getting value from distressed assets, often out of bankruptcy. Common stockholders have no priority in a bankruptcy and usually get nothing.
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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.
