Bed Bath & Beyond rips 50% gain even as the retailer enters talks about a bankruptcy loan

Michael M. Santiago

Bed Bath & Beyond (NASDAQ:BBBY) is reportedly talking to potential lenders that would step in to finance the company during bankruptcy proceedings, sources tell Bloomberg.

Those talks are said to include discussions about a stalking horse bid, which would see an interested party also offer to buy some or all of the company’s assets through the bankruptcy process.

The threat of bankruptcy has been far from the mind of some traders with BBBY on a tear this week. Shares of Bed, Bath & Beyond ended Thursday up 50.14% and added another 3.82% in the postmarket session to land at $5.44. That puts the highly-shorted stock at its highest level since the early part of October, but still down 88% from its highest trading level of 2021.

Seeking Alpha author Leo Imasuen thinks Wayfair is a more attractive retailer to pick up than Bed, Bath & Beyond.

Comments

[Flipper2058]

Just so people know, the shares won’t be cancelled until the end of their time in bk court which could be up to a year. They just trade in the pinks with a q added.
It’s super tempting I know, but trying to maintain a short position I put in the “ too hard” category.
I’ve had decades at trying. :-/:

[Anthony Cataldo]

@Flipper2058 Nibbling a few puts.

[anderdan11]

@Flipper2058 I am still sitting on REVLQ in bankruptcy.

[qwerty11]

@Anthony Cataldo I guess they are cheap now with the stock elevated and BK risk largely mitigated...

[kpmedia]

All this tells me is that the market low isn't in yet. BBBY, GME, AMC, TSLA, Bitcoin, etc. We're not done. Memesters lost lots of money last year, but have rebuilt their piggy bank by actually working, but also getting overpaid. So again they play.

MoM inflation was flat or up, not declining. YoY core increased. I don't know why the market is up today, nor what anybody in the market is thinking. I really don't think they are thinking. More rate increases, higher for longer, earnings will overall collapse. We're alerady started to see chinks in the earnings armor, and the season hasn't even started officially yet.

[BeCall]

@kpmedia I agree, and the earnings disappointments if they come will cause the big market correction. It's the lagging indicator, after rates are raised, inflation starts to come down, unemployment starts to go up.

[sbwiad33]

Given all the hype I have seen that in revlon in Redbox etc these stocks will drop like a rock 50% in one day on just a rumor of bankruptcy then shoot 100% on no news. One thing for sure the end of this will be no warning shares halted on bankruptcy proceedings so too painful to watch this.

[Sermer]

This is surely a sign that retail investors have too much money and definitely not that short sellers got greedy again…

Doesn’t matter to me lol. Easy trade. Bought a few short term calls and some longer term puts. If it keeps squeezing I’ll buy some more puts with the call profits. Not a crazy amount of upside unless it really keeps ripping but I’ll take it.

[Jay Maven]

@Sermer With 3-digit IV, long options isn't really a good idea

[Pmg1959]

I went there today and bought some bed sheets. They are nice. I am resting on them now. Ergo the stock is a buy.

[nkvbradenton]

@Pmg1959
A beautiful anecdote, perfect segue to stock ownership leap. Buy some tomorrow. It will make you very rich.

[AndreasHayn]

@Pmg1959 😂

[qwerty11]

@Pmg1959 Only if you bought them expensive...

[Chris Lau]

Reasons fed will raise rates 50 bps:
BTC $19,000.
BBBY up on bankruptcy.
APE, UPST, CVNA up.

[warshack]

@Chris Lau doesn't matter even if he raises it 500 points. There is 4.5 trillion dollars floating around that were printed in the last couple years, that money has to go somewhere, even a fraction of a percent moving into memes will send them all to the moon.

[20W_261]

@warshack No it won't. If those stocks DO go way up only a small number of shares will be sold at those prices. The 'apes' all seem to think that if the stock price goes way way up all of everyone's shares will suddenly turn them into billionaires. It isn't going to happen.

[TigerCub911]

@Chris Lau Well, I bottom-fished all of them, sold them except 100 shares each. Made decent amount of money. Still have puts on BBBY, sold BITO and rebought BITI today. BTC just doesn't make sense

[Fred Pollack]

On Jan-5th BBBY issued a 12b-25 (see bedbathandbeyond.gcs-web.com/... which said the following:

“Bed Bath & Beyond Inc (the “Company”) is filing this Notification of Late Filing on Form 12b-25 with respect to its Form 10-Q as of and for the three months ended November 26, 2022 (the “Form 10-Q”). The Company has determined that it is unable to file its Form 10-Q within the prescribed time period without unreasonable effort or expense for the reasons set forth below.

The Company expects to file its Quarterly Report on Form 10-Q on Tuesday, January 10, 2023, which is within the five-calendar day extension provided by Rule 12b-25.”

As I write this (Jan-12th, 5:45pm EST), BBBY has not filed its 10-Q to the SEC.

Note that they did not take questions on their earnings call on January 10th. So no one had the opportunity to ask: (a) Will you be filing your 10-Q today (Jan-10th)?; or, (b) Do you plan on making the interest payment on your ~$1B unsecured bonds on Feb-1st?

The logical hypothesis is that BBBY will be making an announcement by Monday morning.

Disclosure: Short BBBY, mainly through out-of-the money naked calls.

[nkvbradenton]

@Fred Pollack
I think you are playing this correctly. There is no way to short outright the common, and those capable of doing it are already in trouble if not hedged via upside calls. There is short term pain and suffering, as the stock makes exaggerated spike and familiar gamma squeeze the name of the game.

Well, implied volatility is thru the roof and great time to be a seller, via shorting upside calls. I have been a net seller of April $10 calls and added a massive amount today. So far proven wrong with the premiums spiking all the way past $2 level today and I got only one trade there.

[Flipper2058]

@Fred Pollack Monday seems mighty fast. I assumed announcing of gracing the bond interest first.
Going concern audits take extra DD.

[altitudedrew]

@Fred Pollack Issuers that fail to file within the extension period are subject to enforcement actions by the SEC, including possible revocation of the company’s stock registration. Others costs that late filers may incur include being delisted from the an exchange, penalized by creditors for debt covenant violations tied to timely filings, and market impact costs. We shall see how long BBBY can avoid any of these nasty things happening.

[panitaxx]

equity will be wiped out. bonds recovery probably in the low teens.

[Flipper2058]

@panitaxx
No way bond recovery anything. Lawyers will take that.
I’d be surprised they don’t end up in a chapter 7 and never exit.

[bondsmoker]

@panitaxx

Yeah, bond recovery likely zero - or close to it.

They are losing money prior to interest expense. Meaning, debt could go to zero, and they'd STILL be losing money.

Sure, they can improve their operations, generating profits prior to debt - which would result in accrued value to the bonds....IF it weren't for the pesky bankruptcy lawyers, and DIP lenders, who will be siphoning off all of that value.

The unsecureds, I'm afraid, are a long-term zero. Maybe good for a trade, similar to the stock, but fundamentally worthless.

[nkvbradenton]

The link below is has more information, directly from Bloomberg......(Via, Yahoo finance.

finance.yahoo.com/...

[BeCall]

@nkvbradenton I wonder if this meme surge is helping them do a pre-pak BK. Certainly adds to a feeling of worth about the company that I don't think is really warranted. But investors might.

[Flipper2058]

@BeCall
Borrow rates on shorts hit 438% yesterday on the street. Retail doesn’t care about anything else than that.
It’s apart of the equation Wall Street misses.
The volume at 300m certainly isn’t all retail either. There’s a Grand Wizard somewhere behind the curtain. Be careful.

[anderdan11]

@Flipper2058 I honestly don’t think there is a grand wizard. In my opinion the market cap of BBBY got so low (justifiably) that a relatively small amount of retail traders buying OTM options could get the stock moving. Perhaps some bigger players (hedge funds) swept up all the open interest on Monday to see if they could light a match, but at then end of the day I really think it is that simple.

[halba12]

most bullish conditions ever in market history. cryptos surging as well.

[hila9t]

The extreme price hike has nothing to do with bankruptcy loans or talks. It has everything to do with apes.

I was thinking that after burning fingers multiple times, apes will not put their finger on fire again. Oops ... I forgot ... Apes have a very short memory ...

[anderdan11]

@hila9t it is just gambling. Most people on SA are (or try to be) serious investors. However, a lot of people throw money at plays like this with 1,000.00 or something and hope it rockets. Nothing more than a lottery ticket to them; just the excitement lasts longer.

[Orangejulius]

This is further proof the Fed needs to continue holding rates high and tighten the job market. People won't be throwing their money into joke plays like a soon to be bankrupt company if they're worried about paying the rent. We're nowhere near that point.

[muishin]

@Orangejulius Wouldn't that just cause more meme trades as many weak companies become heavily shorted penny stocks? The problem mainly comes from hedge funds that profit from shorting.

[Sermer]

@Orangejulius well I’m glad you’re not the fed chair. Heavily shorted stocks with low market caps face a short squeeze. Surely it must mean that inflation is bad!

The fed’s job isn’t to protect bear profits nor is it to prevent gambling.

[David Kincaid]

as wall street constantly proves, better lucky (or politically connected) than smart.

[20W_261]

@Eric ERBE Luck is fickle. And without fundamentals, this stock is a trap.

[David Kincaid]

@20W_261

yes and no

[Who Moved My Cheese]

The next $trillion dollar company. Will soon surpass Apple.

[20W_261]

@Who Moved My Cheese Utterly deluded. The stock goes up based on absolutely nothing other than meme stock bidders.
Pay no attention to that bankruptcy declaration behind the curtain!

[Mr. Driller]

I agree with all the comments. Problem is - we all thought rescuing Hertz was crazy too ? LOL:).....Having said that, I'm not in BBBY and not gambling this thing. Made some profits on it Last year - good enough for now.

[BeCall]

@Mr. Driller I think Hertz was more like rescuing Chrysler - a big player in a high-cost high-infrastructure industry that can regain its footing with some temporary help. BBBY is just another retailer where you can get a Wamsutta towel, a plastic egg turner, or a Nespresso machine. It used to be something sort of special, back when retail was far less competitive.

[King Rat]

@Mr. Driller time will tell if BBBY follows the same path as Hertz.

The craziest part of Hertz was (with slight hyperbole)
Week 1) bankruptcy announcement
Week 2) Stock rises 200%
Week 3) $1billion stock issuance
Week 4) stock rises another 100%
Week 5) stock declared worthless
Week 6) $8 a share buyout offer
Week 7) rest

[nkvbradenton]

@King Rat
Hertz had a viable business model and demand for their offerings.

[OneMoreCup]

speculators are funny animals, driving their cars off the cliff......oh well, without them, how would you get all these rich Wall St types.......

[TommyIrish]

The company is completely bankwupt.

Still Apes buy the stock valuing it at $400 million.

Even as they are preparing to file to cancel the stock. Insane.

[20W_261]

@TommyIrish Who could want to miss the chance to buy as much stock as possible which is on its way to ten cents a share or less?

[TommyIrish]

@20W_261

Of course, Bed Bath & Beyond are/can/will now sell stock for $5 to the Apes. Maybe keeps the Chapter 7 off the table for awhile.

Yes, ultimately the marcum dictum is that perpetually loss making companies go to zero.

Still, a lot of easy money floating around it seems so may take a while…

[Krypto]

I guess the Apes think bankruptcy is a bluff?

If I were the person running BBBY, I would sell all the shares the market would buy up to my authorized levels.

[20W_261]

@Krypto And there... goes the short squeeze.

[Keops]

Beyond stupid

[OldMillennial]

so are they issuing new shares yet? they need to raise as much funds as humanly possible from all these idiots as soon as possible.

[parity]

@OldMillennial they have an ATM and the last time the stock ripped to $20+ last year, they raised a few hundred MM from my recollection.

[Safety In Value]

@parity can they use their ATM without being current on quarterly filings? Seems like it would be obviously beneficial to the firm to sell shares here, especially given the volume thisnis doing.

[parity]

@Safety In Value I don't know the answer to that. In any case, I do not think any reasonable amounts that they raise would keep them out of BK. Remember at the previous rip, all they were able to raise was a drop in the bucket vs. the debt hole that they have so anything they would raise would just pad the unsecured and claims classes. I would also consider the fact that there is news that they are actively considering BK. It is questionable if a company in active discussions should be issuing new stock. It is a bad look for the Board and mgmt. CORZ recently did do that though.