Bed Bath & Beyond (NASDAQ:BBBY) is back at it again, dominating today’s headlines. BBBY stock soared 92% on Monday and at one point, shares were up 130.5%. On Tuesday, shares are down close to 50% in the session.
It’s been a strange couple of weeks for Bed Bath & Beyond and other meme stocks. As noted earlier this week, the retailer is in serious trouble. The company is looking at ways to restructure its business. It’s been laying off staff and closing stores as both the top- and bottom-lines remain under pressure. Worse yet, the idea of bankruptcy has been thrown around.
Despite these issues, investors have been piling back into BBBY stock and other meme stocks. They’ve also been buying other distressed stocks like Carvana (NYSE:CVNA) and nibbling at previous short-squeeze favorites like GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC).
At one point, BBBY stock spiked more than 360% from the Jan. 6 low to the Jan. 12 high. Shares ran hard again a few weeks later, climbing 235% from the Jan. 26 low to the Feb. 6 high. Volatility has been running rampant here, but so too has speculation, as almost 50% of the stock is sold short according to Fintel.
Capital Raise for BBBY Stock
It was previously reported by the Wall Street Journal that the company could look at “raising capital in the debt and equity markets.” Well, it appears the retailer will do just that.
The latest offering will allow Bed Bath & Beyond to receive $225 million right off the bat and will include an additional $800 million in the future. On top of that, the retailer secured a $100 million loan from one of its lenders, Sixth Street Partners.
The proceeds will be used to pay back a loan Bed Bath & Beyond defaulted on last month — owed to JPMorgan (NYSE:JPM) — as well as the $25 million interest payment it missed on Feb. 1.
As you can tell, clearly the company is still struggling. Neil Saunders, managing director at GlobalData, had this to say about Bed Bath & Beyond: “In our view, this is a last roll of the dice from a company that is desperate to raise cash to provide some financial headroom to pay down debts and keep operations going.”
Even if the company can pull this off, the deal is going to be a weight on BBBY stock. Dilution and/or increased debt are not positive factors for a stock price. Then you throw in the company’s fundamental struggles, and it becomes even more concerning.
Unless investors specialize in distressed assets, it may be best to leave Bed Bath & Beyond alone. That said, the speculative nature of BBBY stock is sure to bring out many investors and traders.
On the date of publication, Bret Kenwell 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.
