BBBY Stock (NASDAQ:BBBY)
As a final resort to avoid bankruptcy, Bed Bath & Beyond (NASDAQ:BBBY) said on Monday that it will raise about $1 billion via an offering of preferred stock and warrants. As a result, BBBY stock plunged.
In its securities filings, the home goods firm warned that it would “likely apply for bankruptcy protection” if it could not carry out the complicated deal. Concerns over the chain’s continued existence were sparked by an announcement it had defaulted on a loan in recent weeks.
Two sources familiar with the subject indicated that Bed Bath & Beyond (NASDAQ:BBBY) has been in discussions with an investment company to underwrite a significant amount of the potential transaction.
BBBY stock surged 92.1% on Monday to end at $5.86. It fell 43% in premarket trading on Tuesday when Bed Bath & Beyond announced the pricing of its initial public offering, closing at $3.30.
A total of 23,685 shares of Series A convertible preferred stock, 84,216 shares of Series A convertible preferred stock warrants, and over 95,000,000 shares of common stock warrants will be issued.
Bed Bath & Beyond anticipates an initial $225 million in gross profits from the sale, with a further $800 million to be raised in subsequent installments.
When activist investor and GameStop Corp (NYSE:GME) chairman Ryan Cohen invested in Bed Bath & Beyond and pushed for reform, the stock skyrocketed, reaching a $30 per share last year.
“The fragile balance sheet, massive debt, and fundamentally flawed firm are likely to scare off many potential investors. They will consider it a waste of good money. “The CEO of GlobalData, Neil Saunders, made this statement.
The business said that if the planned selling goes through, Bed Bath & Beyond will be exempt from its recent bank default.
The troubled retailer said it planned to use the sale money to pay down its existing revolving loans and make the interest payment on its bonds that it had neglected to make on February 1. It also intends to use a first-in, last-out loan from investment company Sixth Street, which would provide an extra $100 million and be repaid first in the event of bankruptcy.
- Riley Securities, a Los Angeles-based investment bank, is acting as the deal’s only book runner and stands to earn a maximum fee of $10 million.
A specialist in bankruptcies, Holly Etlin, was named temporary CFO of Bed Bath & Beyond.
The Union, New Jersey-based home goods retailer saw demand decline in recent years due to an unsuccessful merchandising strategy to sell more store-branded products. The company first gained prominence in the 1990s as a popular destination for couples creating wedding registries and preparing for new babies.
Six months after announcing over $500 million in fresh funding, employment layoffs, and 150 shop closures, the firm raised worries about its capacity to continue as a going concern in January.
Bed Bath & Beyond stated on Monday that, in addition to the 250 store closures already announced, it will be closing an additional 150 locations.
As of January, Bed Bath & Beyond has said it had stopped making payments on a loan from JPMorgan Chase (NYSE:JPM) Bank N.A. According to Bloomberg News, the company’s attempts to find a buyer have also halted.
Hertz Global Holdings (OTC:HTZGQ), a vehicle rental company, filed for bankruptcy and then tried to sell new shares before being forced to halt the offering when the U.S. Securities and Exchange Commission (SEC) expressed concerns without providing details.
Lynn LoPucki, a professor at the University of Florida, compared the current market climate to a comparable circumstance in which a financially troubled corporation was trying to sell securities. “Both scenarios have the same underlying factors. If the SEC were to regulate both companies equally, the fact that one is insolvent and the other is not would make no difference.”
Bed Bath & Beyond reportedly has liquidators ready to liquidate more shops if a buyer isn’t found at the last minute.
Featured Image: Google Images @ shopassociation