Bed Bath & Beyond is reportedly selling $1bn worth of stock to avoid bankruptcy

Bed Bath & Beyond has reportedly brought in investors for a last-minute cash injection to help the home-goods retailer avoid bankruptcy, but experts are skeptical whether the plan will work.

Hudson’s Bay Capital Management has agreed to conduct the preferred stock sale that Bed Bath & Beyond announced late Monday night, which will raise more than $1 billion, Bloomberg reported.

However, the retailer’s shares, which surged 92% to close at $5.86 on Monday, fueled by the meme crowd, closed up 49% on Tuesday at $3.01.

“There is virtually no chance that the plan they announced yesterday will prevent bankruptcy, because the debt hole they are in is too big,” said problem debt expert David Vander, partner at Tarter, Krinsky & Drogin.

“If you bought $BBBY for $5.75, you really deserve to lose money,” CNBC host Jim Cramer tweeted.

Wall Street’s Maverick tweeted: “What the ‘geniuses’ chasing bankrupt companies don’t understand is that it’s only a matter of time before these companies use pumps to dump shares and raise much needed cash.”

Vander added: “Shame on Bed Bath & Beyond for taking advantage of a bunch of memes who can’t control themselves by throwing good money at bad stocks.”

On Monday, the company announced a plan to avoid bankruptcy by securing a $100 million line of credit from one of its creditors, Sixth Street Partners, and approval to raise more than $1 billion in a preferred stock sale, according to SEC filings. The funds will be used to pay off a $1.1 billion debt, the company said.

At the same time, the home improvement company admitted in the filings that if it “is likely to file for bankruptcy protection” if all of these transactions are not “completely completed.”

Bed Bath & Beyond, which defaulted on a loan from JPMorgan Chase in January, putting it on the path to bankruptcy, didn’t have much hope that its plan would work.

“There are certain conditions for us to receive proceeds at each close, including that our common shares must remain listed on the national securities exchange, that we have enough authorized shares of common stock to issue shares subject to such close,” reads the document. adding that “our existing common stockholders will be significantly diluted by the issuance of securities under this offering.”