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BBBY stock price has crashed, and bankruptcy is highly likely

By:
on Aug 19, 2022
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  • Bed Bath & Beyond stock price has crashed hard this week.
  • Ryan Cohen, the biggest shareholder, dumped his stock.
  • The company has hired restructuring experts.

The Bed Bath & Beyond (NASDAQ: BBBY) stock is unraveling. The stock crashed by more than 35% on Thursday, erasing most of the gains it has made in the past few weeks. It ended the day at $18.55, which was lower than this week’s high of $30.

Will Bed Bath & Beyond survive?

BBBY stock price has crashed hard in the past few days after Ryan Cohen’s RC Ventures dumped the stock. The fund sold 8 million shares at prices ranging from between $18.68 to $29.22. Ryan is a notable investor and entrepreneur who established Chewy and is the current chairman of GameStop.

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He dumped the stock at a time when there are concerns about whether the company’s business will survive. In June, the firm said that its revenue crashed by 25% to about $1.46 billion. It lost $2.83 per share, missing analysts’ estimates by $1.44. Most importantly, its same-store sales were down by 24%.

In addition to Ryan’s sales, Bed Bath & Beyond share price cratered after the company hired a restructuring lawyer to repair its balance sheet. It hired Kirkland & Ellis, a top law firm that has vast experience in the sector. 

The firm’s debt has become unmanageable as sales and profitability sink. In the most recent quarter, the company said that it had about $107.5 million in cash and equivalents. Its total liabilities rose to over $5.17 billion. It owes $1.5 billion in capital leases and $1.38 billion in long-term debt.

Therefore, with inflation at elevated levels and with growing slipping, there is a likelihood that the company will file for bankruptcy. Another likely move will be to raise capital by issuing new shares, which will lead to more dilution. According to Bloomberg, the company has approached several private credit players about asset-based credit line.

Is it safe to buy BBBY stock?

This week’s performance of the BBBY stock price has been brutal because of Ryan’s influence in the company. He added three directors to the board, meaning that he is a well-knowledgeable insider. 

Therefore, Bed Bath & Beyond is not an ideal long-term investment. Besides, the firm has significant debt, is facing significant competition, and its growth has stalled.

However, BBBY is also a leading meme stock. This means that the shares will likely see elevated volatility and a short squeeze cannot be ruled out. In the past, stocks of bankrupt companies like Revlon and Hertz have gone parabolic.