The stock of Bed Bath & Beyond is tanking today and accumulates a 5-day losing streak despite the company securing a financial lifeline that could buy some extra time for the struggling retailer.
In a statement published on 1 September, Bed Bath & Beyond stated that it obtained fresh financing consisting of $500 million from an asset-backed loan (ABL) with the assistance of JP Morgan & Chase and Sixth Street Partners.
“Together with Sixth Street, J.P. Morgan and our banking partners, this new financing will bolster our liquidity and strengthen our balance sheet. We are pleased to announce this critical step in moving Bed Bath & Beyond in a positive direction by strengthening our financial positioning”, commented Sue Gove, the company’s interim Chief Executive Officer.
A day before, Bed Bath and Beyond (BBBY) shared an update about its financial situation in which the management team disclosed their intention to sell as many as 12 million BBBY shares to raise additional capital. This represents around 15% of the firm’s total outstanding shares according to data from MarketBeat.
Confluence of Negative Events Prompts Drops in Bed Bath & Beyond Stock
Market participants did not react positively to the news as Bed Bath and Beyond stock dropped 21.3% on the day that the presentation was published and 8.6% the day after.
Overall, BBBY stock accumulates a 25.6% loss since September started as the buying interest that prompted last month’s short-squeeze appears to have faded. In addition, the company’s Chief Financial Officer, Gustavo Arnal, committed suicide four days ago.
This event is adding an extra layer of uncertainty to the company’s outlook and market participants have reacted accordingly as changes in the leadership team of a corporation in a time of financial distress can be quite harmful to the business’s recovery prospects.
Bed Bath and Beyond is yet to announce who will be appointed as interim or permanent Chief Financial Officer. At this point, whoever occupies the position will be a critical puzzle piece to ensure the company’s survival.
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Arnal’s suicide took place two days after the company announced massive layoffs and store closures as part of its turnaround efforts. The deceased executive was also named in a lawsuit that alleged that the company misled investors by providing inaccurate information about the firm’s financial performance to boost share prices.
Prior to his date, in mid-August, Arnal sold 55,013 shares of BBBY and collected around $1.4 million as a result of the transaction.
A Summary of Bed Bath & Beyond Turnaround Plan
According to a presentation published by the company days ago, Bed Bath and Beyond secured $500 million in fresh financial consisting of $375 million from a FILO loan and $125 million from the expansion of an existing ABL facility.
Moreover, the company plans to raise additional capital by selling up to 12 million shares to the public via at-the-market offerings.
The firm is also planning to trim its cost structure to save around $250 million during the full 2022 fiscal year. To achieve this, management will be reducing the company’s workforce by 20% and it intends to close more than 150 poor-performing stores.
During the second quarter of the 2022 fiscal year, Bed Bath & Beyond is forecasting to sell around $1.45 billion while burning around $350 million in cash compared to $500 million the firm burned in the previous quarter.
By the end of the first quarter of 2022, the company had around $200 million in cash and equivalents and another $700 million in undrawn credit lines. Along with the $500 million it secured recently, the firm should have approximately $1.4 billion in total liquidity that could help it stay afloat for twelve months or so.
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