Mattress Bathtub & Beyond’s (BBBY) new Hail Mary pass to stay in small business may not still be appreciated by the bears waiting to pounce on a extended-rumored personal bankruptcy filing.
“Headline possibility linked to a prospective individual bankruptcy feels priced in at this juncture,” Jefferies analyst Jonathan Matuszewski wrote in a consumer notice on Wednesday. “Given Bed Bathtub & Beyond’s <$350 million market cap and high short interest, we believe the potential to capture an incremental ~$800 million in gross proceeds from the equity deal (essentially buying more time to enact change) could lead to a spike in shares that bears may not be fully anticipated."
The analyst maintained a Neutral rating on the stock and cut his price target on the stock to $3 from $3.50.
Earlier this week, the ailing home goods retailer secured $1.025 billion in funding from an equity offering. Bed Bath & Beyond will receive about $225 million upfront and as much as $800 million over time.
The company also secured another $100 million loan from lender Sixth Street Partners.
These funds will be used to pay down pre-existing debt and meet general corporate purposes, namely to stock empty shelves with merchandise.
To Matuszewski’s point, Bed Bath & Beyond’s stock has seen wild swings as the high-stakes drama has unfolded.
Shares exploded by more than 120% on Monday to nearly $7 amid speculation of a cash raise. But the stock has since crashed 61% from those highs as the equity offering stands to dilute existing shareholders.
The chain’s survival is far from guaranteed. By the end of 2022, Bed Bath & Beyond stacked up more than $1 billion in debt and losses. Rumors of bankruptcy began circling the company, particularly after warning in a recent regulatory filing that it may seek those protections.
To preserve cash, Bed Bath & Beyond continues to close hundreds of stores.
The company said this week it will aim to have roughly 360 of its namesake stores left open, down from more than 700 at this time last year. Yahoo Finance first reported the complete closure of the company’s Harmon chain.
“What’s clear is a more widespread cut to the store fleet simplifies the turnaround and deal proceeds bolster inventory for surviving stores,” Matuszewski added. “What’s unclear is whether traffic will recover following empty shelves the past few months, the degree to which macro may derail plans, and if the go-forward strategy is the ‘silver bullet’ for returning to relevancy.”
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