At the same time, the retailer has become a favorite of meme stock traders — retail investors who bid up the shares of undervalued companies. On Monday its stock surged nearly 100 percent, giving it a market value of around $690 million. Its stock has swung wildly in the past few weeks as traders placed bets on its fortunes.
The equity offering, which has been tried by other ailing meme stock favorites, like AMC Theaters, is legal, securities experts said. The risk is that by the time Bed Bath & Beyond issues its shares, which could take days, its stock could drop further, meaning the company might need to issue more shares and further dilute its current shareholders, said Reena Aggarwal, a professor of finance at Georgetown University. But even that option might be viewed as a positive alternative to bankruptcy by shareholders, who are last to be paid out in any filing.
Some experts even argued that it was in the company’s duties to take advantage of the frenzied trading, even if Bed Bath’s stock price is not, by any traditional measure, justified by current business fundamentals.
“If suddenly a golden goose has appeared on your doorstep and starts laying golden eggs — and you decide, well, I just don’t believe in golden geese, and I’m just going to ignore these geese and eggs on my doorstep — I’m not sure that’s the right call,” said Eric Talley, a professor of finance at Columbia Law School.
Even borrowed time leaves questions about how Bed Bath & Beyond might ascertain a strategy to turn its core business around. At its peak in 2013, Bed Bath & Beyond had more than 1,500 stores and a market value of about $17 billion. It now has fewer than 800 stores. Its home-goods emporiums full of towels and kitchen aids — all available at a reduced price with that big blue coupon — were beacons that kept shoppers coming back.
Bed Bath & Beyond’s inventory levels had dropped to less than half by the end of December, according to the research firm DataWeave, a signal that the brands that sell to the store have been pulling back, fearful that they might never be paid for the products they had sent it.
