Understanding the seemingly unshakeable optimism of many meme stock investors is frequently a challenging exercise. A good example is the trading pattern of Bed Bath & Beyond Inc. (OTC: BBBYQ), a well-known, but dramatically over-leveraged, seller of domestic merchandise like bed linens, bath items and home furnishings.
The shares soared to around US$30 in August 2022 as many retail traders banded together to attempt to cause a short squeeze to push the stock higher despite consistently deteriorating fundamentals. Unlike its competitors, BBBYQ could simply not adjust to a consumer shift to e-commerce purchases as opposed to in-store shopping. Nevertheless, the (unmerited) stock price surge in 2022 allowed BBBYQ to raise US$600 million from two equity offerings in early 2023.
The capital infusion was not enough to save the company, and BBBYQ filed for Chapter 11 bankruptcy protection in April 2023. At the time of its filing, BBBYQ had US$5.2 billion of debt. After the filing, the stock settled into a trading range of US$0.20-US$0.40 per share, reflecting the (admittedly slim) possibility that equity investors would receive some recoveries after the company emerged from bankruptcy.
This enthusiasm should have been severely dented in July when the company filed its Chapter 11 plan documents in the U.S. Bankruptcy court. The plan called for unsecured creditors to recover just 2.5% of their US$2.4 billion in claims, and for equity investors to receive nothing.
Proceeds from liquidation sales at its stores, the sale of leases, the sale of the Bed Bath & Beyond brand name to Overstock.com, and the sale of Buy Buy Baby intellectual property rights to crib retailer Dream on Me allowed the unsecured creditors to receive this modest payback. Still, the stock barely moved on these clearly unwelcome developments.
Finally, on September 12, U.S. Bankruptcy Judge Michael Kaplan confirmed BBBYQ’s liquidation plan, which calls for zero payments to shareholders. Remarkably, the shares are still trading at US$0.10 even though they are worthless. Indeed, more than seven million shares traded on September 13 after the judge’s decision was handed down, with millions exchanging hands daily still despite the ruling.
Bed Bath & Beyond Inc. last traded on the OTC at US$0.10.
Information for this briefing was found via The Wall Street Journal and the sources and companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.