This is bizarre. Bed Bath & Beyond (BBBY) is on death’s doorstep. It just missed debt payments. It’s closing more stores, and is a complete mess. It has even warned that efforts to stop the bleed haven’t been very helpful. Yet, the stock is up 18% to $3.32 today. Most of that may be from short covering on hopes BBBY can avoid the inevitable, we believe.
Just yesterday, the company was due to pay more than $28 million on three tranches of notes on Feb. 1, totaling about $1.2 billion. It missed that, and has now entered a 30-day grace period. Unfortunately, that may be challenging to meet, too.
“At this time, the Company doesn’t have sufficient resources to repay the amounts under the Credit Facilities and this will lead the Company to consider all strategic alternatives, including restructuring its debt under the U.S. Bankruptcy Code,” Bed Bath said in a quarterly filing to the Securities and Exchange Commission.
Investors can always short the stock BBBY stock, or buy put options, where there’s massive volume. But it may be best to just avoid this one altogether. It’s far too volatile, and is running on nothing substantial.
The company is expected to file for Chapter 11 bankruptcy soon, says The Wall Street Journal.
“Filing for bankruptcy protection doesn’t mean the company is going out of business. In a potential chapter 11 filing, the company would likely seek financing that would see it through the bankruptcy process or look to sell assets to repay debts,” they added. “However, the company’s financial troubles are already leading to empty shelves. Many of the chain’s vendors have stopped shipping goods in recent weeks because they are worried the retailer might not be able to repay them.”
Again, it may be best to avoid BBBY.