If the Bed Bath & Beyond management team has any more financial engineering tricks up their sleeves, now would be a god time to deploy them.
When the stock market opened on Monday morning, the share price of the besieged Big Box retailer had sunk to under a dollar, which was its latest threshold to keep getting funds from a convoluted investment plan that was serving as its financial lifeline while it tried to get its act together.
By mid-morning, the share price had sunk almost 17% to 86 cents a share, it’s all-time low and down nearly 50% just in the past month. At that price, the market cap on the company – the value of its all shares – was barely $100 million.
This latest plummet comes after news on Friday that BBB was planning a reverse stock-split plan that would reduce the number of outstanding shares and theoretically at least bring that share price back into the territory of the living. The stock deal, scheduled to be announced at a special shareholder meeting on March 27, would be in the range of 5-to-1 to 10-to-1, with the company’s board making that final determination.
Whether this new twist has anything to do with today’s stock drop – in the first day of trading after the announcement – is not known and the company is not talking today. In Friday’s statement on the stock reverse split, the company said the move was “intended to generate greater investor interest in the company,” as well as give it the resources to work out its turnaround plan.
But today’s plummet takes the home furnishings retailer further into the great financial unknown. Its investment plan with private fund Hudson Bay Capital is predicated on its stock staying at above $1 a share. And even that number was lowered just in the past two weeks from $1.25, the company had announced previously. The investment deal – one even those with backgrounds in finance have said is highly unusual and with little or no precedent – is contingent on BBB’s share price staying at a level where Hudson Bay can buy them at a discount directly form the company, sell them quickly at a higher rate and pocket the difference.
Without that incoming investment – now at about $360 million according to Bed Bath – the retailer has no other options to secure additional funding. And without more money, BBB is essentially broke and would need to file bankruptcy.
Can BBB pull one more rabbit out of its hat? At some point the magic runs out, and while it’s been said many times over the past six months (including here), this could be it.
WarrensReport 