NEW YORK - Bed Bath & Beyond said on Tuesday it has raised about US$225 million (S$298 million) in an equity offering and may get another US$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 share sale, two people familiar with the matter told Reuters on Tuesday before the offering closed.
Bed Bath & Beyond, which first raised the prospect of bankruptcy in early January, said on Monday it planned to raise roughly US$1 billion in a complex deal where it offered preferred stock and warrants.
Analysts said the new cash may afford Bed Bath & Beyond only a few quarters to revive its business, and a weakening economy would diminish any chance of a successful turnaround.
The offering “may be a Band-Aid, but I’m not certain of all the make-up of their balance sheet”, said Mr Robert Gilliland, managing director at Concenture Wealth Management. “The problem is that they’re probably not going to be a big turnaround story.”
Hudson Bay Capital is unrelated to Canadian department store chain Hudson’s Bay Co.
In a letter to suppliers seen by Reuters, Bed Bath & Beyond chief executive Sue Gove tried to assuage concerns, saying she expected the stock sale to “catalyse our efforts to turnaround the company”.
She asked for vendor support and promised “open dialogue”.
“We also expect it to enable strategic initiatives in fiscal 2023, providing the resources and the needed runway” to continue to execute its transformation, she said.
Bed Bath & Beyond’s vendors are worried and have communicated little to the company, which has been delaying or halting payments, two vendors previously told Reuters.
“All is on hold,” a maker of children’s apparel said last week, adding that it had stopped shipping products to Bed Bath & Beyond early January. A personal care products maker said that payments were “massively delayed”.
Bed Bath & Beyond did not immediately respond to a request for comment on the memo or what vendors said.
Reuters reported in late January that Bed Bath & Beyond had lined up liquidators to close additional stores unless a last-minute buyer emerged.
Prices on Bed Bath & Beyond bonds due in 2024 climbed on Tuesday to 24 cents on the dollar from about 5 cents a day earlier, but still reflect financial distress.
Bed Bath & Beyond shares rose 3 per cent in extended trading, after closing down 49 per cent on Tuesday.
“It just looks like a way of extending time in the hopes someone rescues them, but that looks a bit unlikely,” said IG chief market analyst Chris Beauchamp.
“Having been on the edge of the meme stock frenzy, it’s not surprising that this news has poked the embers of that particular mania,” he added.
A part of the meme stock phenomenon, Bed Bath & Beyond saw its shares surge as high as US$30 in 2022, when activist investor Ryan Cohen took a stake in the company and pushed for changes.
Other meme stocks that have been pumped up by retail investors in the past few years include AMC Entertainment and video game retailer GameStop, which closed down a respective 9 per cent and 11 per cent on Tuesday.
“The popularity of meme stocks could ebb and flow depending on the market’s mood (but investors) just have to be careful about it, especially in a high-rate environment,” said Ms Callie Cox, US investment analyst at eToro. REUTERS