Bed Bath Beyond Inc raised $225 million in an equity offering and may get another $800 million over the next 10 months, as the struggling retailer tries to avoid bankruptcy on Tuesday.
Two people familiar with the matter told Reuters on Tuesday that Hudson Bay Capital Management is the lead investor in the share sale.
Bed Bath, which raised the prospect of bankruptcy early last month, said on Monday it planned to raise $1 billion in a complex deal where it offers preferred stock and warrants.
Analysts said that the new cash may allow Bed Bath only a few quarters to revive its business, and a weaker economy would diminish any chance of a successful turnaround.
Robert Gilliland, the managing director at Concenture Wealth Management, said that the offering may be a band-Aid but I'm not certain of all the components of their balance sheet. The problem is that they're probably not going to be a big turnaround story. Bed Bath didn't say anything about Hudson Bay Capital's role in the share sale. Hudson Bay did not respond to a request for comment. The Hudson Bay Capital development was first reported by Bloomberg News.
Hudson Bay Capital is unrelated to Canadian department store chain Hudson's Bay Co.
In a letter to suppliers seen by Reuters, Bed Bath Chief Executive Sue Gove tried to assuage concerns, saying she expected the stock sale to catalyze our efforts to turnaround the company. She promised open dialogue and asked for vendor support. She said it expects to enable strategic initiatives in fiscal 2023, providing the resources and the necessary runway to continue to execute its transformation.
Two vendors previously told Reuters that Bed Bath's vendors have been worried and have communicated little to the company, which has been delaying or halting payments.
All is on hold, a maker of children's clothing said last week, adding that it had stopped shipping products to Bed Bath since January. Payments were massively delayed, according to a personal care product maker. Bed Bath did not respond to a request for comment on the memo or what vendors said.
Last month, Reuters reported that Bed Bath had lined up liquidators to close additional stores unless a last minute buyer emerged.
Prices on Bed Bath Beyond bonds due in 2024 went up on Tuesday to 24 cents on the dollar from about 5 cents a day earlier in the day, but still reflect financial distress.
Bed Bath shares went up 3% in extended trading after closing down 49% on Tuesday.
It just looks like a way of extending time in the hopes someone rescues them, but that looks a bit unlikely, said Chris Beauchamp, chief market analyst at IG.
He said that it was not surprising that this news had poked the embers of that particular mania, having been on the edge of the meme stock frenzy.
As part of the meme stock phenomenon, Bed Bath saw its shares surge to as high as $30 last year when activist investor Ryan Cohen took a stake in the company and pushed for changes.
Other meme stocks that have been pumped up by retail investors in the past few years include AMC Entertainment AMC.N and the video game retailer GameStop Corp GME.N, which closed down a respective 9% and 11% on Tuesday.
"The popularity of meme stocks could ebb and flow depending on the market's mood but investors just have to be careful in a high-rate environment," said Callie Cox, U.S. investment analyst at eToro.
In a regulatory filing, Bed Bath said that recent volatility and current prices reflect market and trading dynamics that are unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last.