Feb 7 (Reuters) – Bed Bath & Beyond Inc (BBBY.O) said on Tuesday it had raised around $225 million in an equity offering and could raise another $800 million over the next 10 months , as the struggling retailer tries to avoid bankruptcy.
Hudson Bay Capital Management is the lead investor in the stock sale, two people familiar with the matter told Reuters on Tuesday before the offering closed.
Bed Bath, which first raised the prospect of bankruptcy early last month, said on Monday it planned to raise about $1 billion in a complex deal offering preferred shares and subscription warrants.
Analysts said the new cash could give Bed Bath just a few quarters to revive business, and a weakening economy would reduce any chance of a successful turnaround.
The offer “may be a band-aid, but I’m not sure what their balance sheet is made up of,” said Robert Gilliland, managing director of Concenture Wealth Management. “The problem is they’re probably not going to be a big turnaround story.”
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Bed Bath declined to comment on Hudson Bay Capital’s role in the share sale. Hudson Bay did not respond to a request for comment. Bloomberg News first reported the development of the Hudson’s Bay Capital.
Hudson Bay Capital has no connection with the Canadian department store chain Hudson’s Bay Co.
In a letter to suppliers seen by Reuters, Bed Bath chief executive Sue Gove tried to allay concerns, saying she expected the share sale to “catalyze our efforts to turn around the business”. She asked for support from the supplier and promised “open dialogue”.
“We also expect him to enable strategic initiatives in fiscal year 2023, providing the resources and runway necessary” to continue executing his transformation, she said.
Bed Bath suppliers are concerned and have had little communication with the company, which has delayed or halted payments, two suppliers previously told Reuters.
“Everything is on hold,” a children’s clothing maker said last week, adding that it had stopped shipping products to Bed Bath since early January. A maker of personal care products said payments were “massively delayed”.
Bed Bath did not immediately respond to a request for comment on the memo or what the sellers said.
Reuters reported late last month that Bed Bath had lined up liquidators to close additional stores unless a last-minute buyer showed up.
Prices for Bed Bath & Beyond bonds due in 2024 climbed to 24 cents on the dollar on Tuesday from around 5 cents a day earlier, but still reflect financial distress.
Shares of Bed Bath rose 3% in extended trading, after closing down 49% on Tuesday.
“It looks like a way to extend time in hopes someone saves them, but it seems a bit unlikely,” said Chris Beauchamp, chief market analyst at IG.
“Having been on the brink of the meme stock frenzy, it’s no surprise that this news has fanned the embers of this particular mania,” he added.
Part of the meme stock phenomenon, Bed Bath saw its shares soar 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 inflated by retail investors in recent years include AMC Entertainment (AMC.N) and video game retailer GameStop Corp (GME.N), which closed 9% and 11% Tuesday.
“The popularity of meme stocks could fluctuate depending on the mood of the market (but investors) just need to be careful, especially in a high rate environment,” said Callie Cox, US investment analyst at eToro.
In a regulatory filing, Bed Bath said recent volatility and current prices “reflect market and trading dynamics unrelated to our underlying business, or macroeconomic or industry fundamentals, and we don’t know if or how much long these dynamics will last”.
Reporting by Deborah Sophia, Amruta Khandekar, Ankika Biswas, Medha Singh, Jessica DiNapoli, Mike Spector and Siddharth Cavale; Additional reporting by Sruthi Shankar, Lance Tupper, John McCrank and Uday Sampath; Editing by Anil D’Silva and Christopher Cushing
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