Bed Bath & Beyond (NASDAQ:BBBY) stock is rising today, but it might not be for good reasons. The retailer has been on a downward spiral for months, demonstrating no real progress. But today brought news that the company is exploring bankruptcy options after failing to raise the cash it needs.
According to Bloomberg, Bed Bath & Beyond could file for Chapter 11 bankruptcy within the coming weeks if not sooner. The outlet notes that the company’s leaders are exploring financing options for the proceedings by “holding talks with advisers and lenders.” This news has sent BBBY stock up due to social media hype. But this doesn’t mean investors should start buying up shares.
What would a bankruptcy filing mean for Bed Bath & Beyond mean for shareholders? Let’s take a closer look at today’s news and break down the most likely scenarios.
What’s Happening With BBBY Stock?
For the past week, BBBY stock has been rising for all the wrong reasons. Last week, activist investor Ryan Cohen hinted that he might be getting involved with a major company again, leading some to speculate that Bed Bath & Beyond is his target.
The stock has also benefited from the growing momentum as the company prepares for a reverse stock split vote on May 9. This is a course of action that companies typically opt for when they have no other options and should signal distress to investors.
Now, it seems that the company is moving closer to bankruptcy, and that should worry all investors. It’s true that BBBY stock is rising today as retail traders bet against the bankruptcy possibility. Data from Ape Wisdom indicates that interest in the stock across social media is rising steadily. This is par for the course from the r/WallStreetBets crowd and should be expected.
However, signs point to a turbulent short-term future for the company, regardless of whether or not it opts for Chapter 11. Per Reuters:
“A Chapter 11 bankruptcy filing could come before April 26, the deadline by which Bed Bath seeks to raise the funds, Bloomberg reported on Wednesday. The decision for filing is not final and plans could change, the report said.”
The way it looks from here, even if Bed Bath & Beyond does not file for bankruptcy this month, it is facing a highly uncertain future. Wall Street hates unstable companies, but it also hates uncertainty. This is truly a lose/lose scenario.
As InvestorPlace contributor Larry Ramer notes, the only course of action remaining for investors is to start selling off BBBY stock now before the bankruptcy takes hold and shares plunge even more. At 42 cents per share, it doesn’t seem like the stock has much further to fall, but that doesn’t mean investors should take further losses.
The End of the Line
While Bed Bath & Beyond hasn’t officially filed for bankruptcy yet, the company’s demise seems truly inevitable at this point. Even after rising 50% on superficial momentum over the past week, it is still down by almost that much for the month. The stock’s race to the bottom has placed it on lists of unstable penny stocks to avoid before they fall even further. If anyone still isn’t convinced that BBBY stock is doomed, consider that the company is being removed from wedding registries at an alarming rate.
Ramer isn’t the only one who thinks that BBBY is a stock to sell. InvestorPlace’s Louis Navellier recently issued a similar take, advising investors to move on, even if the company can avert bankruptcy. Now, it seems that it can’t and the case against Bed Bath & Beyond is stronger than ever.
On the date of publication, Samuel O’Brient 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.