Bed Bath & Beyond shares hit record lows as the company says a reverse stock split could be just a lifeline
Bed Bath & Beyond ( BBBY ) shares closed at a record low Thursday as the company said its last hope for survival may hinge on a reverse stock split.
The move will consolidate the number of existing shares, thereby increasing the value of each share.
“A failure to obtain stockholder approval for the Reverse Split Proposal would likely force us to file for bankruptcy,” the company said in an SEC filing.
Bed Bath & Beyond’s “special meeting” of shareholders to vote on a reverse stock split in the range of 1-for-10 to 1-for-20 split is scheduled for Tuesday, May 9, according to the filing. The meeting comes after months of store closures, various searches for new rounds of funding for the struggling retailer and, most recently, a lifeline to help pay suppliers.
Bed Bath & Beyond shares have fallen more than 98 percent in the past year and ended Thursday̵[ads1]7;s trading at an all-time low of $0.31.
Even if the company votes to boost its stock price, which has fallen roughly 98% in the past year, there’s no guarantee the retailer can recover. Kate McShane, the lead retail analyst at Goldman Sachs, says replacing inventory to revive sales growth will be the main focus of any funding that Bed Bath & Beyond receives.
In its most recent quarter, Bed Bath & Beyond reported that inventory fell nearly 25% year-over-year as revenue fell 33%.
On Thursday, the company announced a supplier shipment program to ease concerns. The $120 million capital line will be distributed to “key suppliers to supplement inventory levels already sold at Bed Bath & Beyond and buybuy Baby,” according to the release.
“Having inventory and having the right inventory will help them,” McShane told Yahoo Finance Live. “I think the question is just in this environment where you have a consumer who is a little bit more thoughtful about their spending exactly what it will bring for someone like Bed Bath & Beyond.”
Make the stock “more attractive”
Bed Bath & Beyond recently closed its approximately $1 billion financing agreement with Hudson Bay Capital management. Part of the financing agreement included monthly stock purchases from Hudson Bay Capital that came at a market discount.
On March 30, Bed Bath & Beyond announced that the deal had ended and said it would enter into a new financing program with B. Riley Principal Capital.
The share price is still seen as a key source of liquidity for the company, which noted in its latest filing that increasing the price per share with a reverse stock split would “help increase brokerage interest.”
“We believe that a higher share price may make our common stock more attractive to a broader range of investors, as we believe that the current market price of our common stock may affect its acceptability to certain professional investors and other members of the investing public,” the company said in the archive.
While Bed Bath & Beyond shies away from failure, the company laid out what it could mean for investors.
“Owners of our common stock will receive no recovery at all in a bankruptcy scenario,” the company said.
Josh is a reporter and producer for Yahoo Finance.
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