Hudson Bay may be regretting its decision to try and save Bed Bath & Beyond (NASDAQ:BBBY) from going under. Last month, the investment firm announced it would be backing the troubled retailer’s plans for a public offering of BBBY stock. Bed Bath & Beyond had hoped to raise over $1 billion and avoid bankruptcy, but it doesn’t seem like either goal will be accomplished.
BBBY stock responded to the news by plunging 32%. That’s nothing compared to how shares have performed since then, however. Over the past month, the stock has fallen 50% with no signs of a rebound. On Feb. 6, the day before the financing news broke, BBBY stock had risen above the penny stock line to almost $6 per share.
Now, Bed Bath & Beyond’s declines have it trading at less than $2 per share. That’s bad for investors, but it could lead to much bigger problems for the company unless something signals an unlikely turnaround.
Let’s take a closer look at what’s at stake for this former meme stock sensation.
What’s Happening With BBBY Stock?
As it has been for weeks on end, BBBY stock is trending downwards today. As of this writing, shares are down 2% for the day, displaying constant volatility but failing to garner any momentum. This is in keeping with how BBBY has performed since its Feb. 7 plunge. Late in February, shares plunged to a near 30-year-low.
Needless to say, this performance is exactly what Hudson Bay didn’t want to see when it agreed to back the offering. If shares fall much further, the firm will likely invoke one of the deal’s contingencies. Bloomberg reports:
“[The] additional cash has strings attached. Among them: Future injections are contingent on Bed Bath & Beyond maintaining a weighted average stock price of at least $1.25 or $1.50, depending on the timing, according to a regulatory filing. The deal terms allow Hudson Bay to waive those conditions if it wants.”
As of now, BBBY stock is dangerously close to falling below the $1.25 threshold. It’s currently near $1.50 and there’s no reason to suspect it will suddenly start making upward progress. The company saw some slight growth yesterday on news that it had successfully made interest payments. But as InvestorPlace contributor Dana Blankenhorn reports, Bed Bath’s prospects still are bleak at best. Even on days when it has good news to report, the stock fails to demonstrate any real growth. Shares have already lost the gains from yesterday.
Bed Bath & Beyond Redemption
At this point, it’s hard to be optimistic about the future of BBBY stock. Shares have had numerous chances to rebound but continuously demonstrate that the ride is over. Bloomberg notes that the company’s plan to raise funds through a new offering put off the retail investing army that had helped shares stay relevant.
It’s not hard to see why, as offerings dilute shareholders. While the funds saved Bed Bath from a bankruptcy plunge, the news also triggered warning bells for other investors.
Now, BBBY stock is likely to fall below the $1.25 mark and, if it does, Hudson Bay may pull out. That will only send shares down even further. Other investors will likely pull out as well to avoid further losses.
No matter how you look at it, there seems to be no path forward for this struggling meme stock.
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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.