Bed Bath & Beyond (NASDAQ:BBBY) stock rallied on hopes the struggling retailer could avoid bankruptcy.
The stock rose 22% on April 18 and another 31% overnight. That sounds great, but it still means a price of just 45 cents per share and a market capitalization of under $200 million.
Analysts are warning investors away from the frenzy, noting that the fundamentals still favor bankruptcy.
Can This Store Be Saved?
If Bed Bath & Beyond could get back on its feet, investors would win big. The company’s horrible fiscal 2023 still saw over $6 billion in sales.
But that looks increasingly unlikely. Couples are already dropping the store from their wedding registries, fearing it won’t be around when they get married.
The chain recently raised $48.5 million in new equity. It has until April 26 to complete its 10-K filing. A recent $300 million equity raise with B. Riley Securities was based on it having a public float worth $700 million, and it’s nowhere near that. The company already owes over $100 million in its credit facilities and another $100 million on letters of credit. The equity raise must go through for it to avoid bankruptcy.
Bed Bath & Beyond has also set May 9 as the date for a shareholder meeting where it will try to execute a reverse stock split. Such a split is necessary for the stock to keep trading, as it has been under $1/share for months.
At Stocktwits, some traders were celebrating, but others were warning that selling could resume at any moment in a “rug pull.” At Reddit, small traders noted significant after-hours volume and hoped the run would continue.
BBBY Stock: What Happens Next?
There are two stories here, a fundamental story and a trader story.
The fundamental story is grim. There’s a smell of death on BBBY stores, and bankruptcy appears imminent. The trader story is different, with people looking out from behind screens, waiting for others to make their move. Both stories are likely to have the same ending in Chapter 11.
On the date of publication, Dana Blankenhorn held no positions in any company mentioned in this story. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
