Bed Bath & Beyond (BBBY), the embattled retailer, saw its stock drop 48% on Tuesday following the announcement of its equity offering to raise up to $1.025 billion. This move has been labeled by analysts as a "last ditch effort to secure its future." Despite the company's recent 92% increase in stock price on Monday, ahead of the offering announcement, its financial struggles have left investors cautious.
The company has been struggling with conserving cash, as it balances on the brink of bankruptcy. Accumulated debt and losses have surpassed $1 billion by the end of 2022. A recent regulatory filing warns of a default notice from JPMorgan and the lack of funds to repay loans.
Short interest in BBBY's shares is currently standing at 53% of the float, according to data from S3 Partners. Despite the negative outlook on the company, the overall trend in meme stocks has seen a resurgence in popularity this year. GameStop (GME) and AMC (AMC) have both seen increases since the start of 2023.
Despite
the recent drop in BBBY stock, the company has seen an upward trend after
hitting a 52-week low of $1.27 on January 6th. On Tuesday, shares closed at
$3.01 each.
The
timing of BBBY's equity offering and its poor financial standing have led
analysts to question the company's capital allocation decisions. Morningstar's
Jaime Katz has a Sell rating on the stock and writes in a note to investors,
"While the timing of the offering seems relatively opportunistic, given
the stock's 90%-plus price runup Feb. 6, we think the capital allocation choices
that are being made under duress are still poor."
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