Bed Bath & Beyond (NASDAQ:BBBY) is getting rocked on Thursday, just a day before the end of the first quarter. Shares are hitting new 52-week lows as BBBY stock slumps about 25% on the day.
For anyone who has been following Bed Bath & Beyond, the significant decline likely does not surprise them. This retailer has been struggling for a while now. Even though BBBY stock became a bit of a meme stock and Reddit phenomenon, it’s been struggling quite a bit from a fundamental perspective.
The latest news is not good, as the retailer “warned it will likely go bankrupt if a last-gasp $300 million equity offering fails.”
If the offering is not fully consummated, the company says it will “likely file for bankruptcy protection.” Of course, with an outlook like that, it’s hard to imagine being a willing buyer.
The news also comes as a deal with Hudson Bay Capital Management fell apart. The firm was ready to provide Bed Bath & Beyond with $1 billion. However, that was dependent on BBBY stock staying above the $1.25 to $1.50 area.
BBBY Stock Appears Doomed
There’s no guarantee that the retailer will be able to raise the funds it’s after. However, even if Bed Bath & Beyond does so, it’s nothing more than a Band-Aid.
CEO Sue Gove said, “The actions we’ve taken have enabled us to create the necessary financial runway to begin restoring our iconic Bed Bath & Beyond and Buybuy Baby businesses.”
However, that’s not really true — and it’s not her fault. She took the helm long after the retailer’s business began circling the drain. But the idea that this deal will provide the necessary “runway” seems like a long shot.
The retailer came to an at-the-market offering agreement in an attempt to sell up to $300 million worth of its stock through B Riley Securities.
Bed Bath & Beyond plans to use the proceeds to “repay outstanding revolving loans” and “cash collateralize any outstanding letters of credit.” Any excess capital will be put toward rebuilding the retailer’s inventory.
In a nutshell, Bed Bath & Beyond is hoping to raise capital in an effort to pay back its lenders. If it fails, it will likely file for bankruptcy. If it succeeds, it will pay back creditors and look to increase inventories.
In the filing, the company noted that there are “reports of strong retail investor interest, including on social media and online forums.” But no matter which scenario plays out, it’s hard to be hopeful with BBBY stock.
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.