Bed Bath & Beyond, the struggling home goods retailer, announced plans for a public offering Monday, a move that it hopes will allow it to pay off its debts and possibly stave off bankruptcy.
Bed Bath & Beyond did not immediately respond to a request for comment.
Early last month, Bed Bath & Beyond warned investors that bankruptcy was a possible option, if it could not otherwise raise money after a disappointing holiday season. It said that its sales in the run-up to Black Friday were a third what they were in 2021.
The retailer said Monday that it had plans to raise a little more than $1 billion in equity offerings, alongside tapping $100 million from its credit line, to repay outstanding loans.
The move is expected to be enough for Bed Bath & Beyond to make payments on its debt and fund its business operations so it won’t have to imminently file for bankruptcy, a person familiar with the situation said. At certain points in the past few weeks, it was unclear whether the retailer would be able to do so.
Still, Bed Bath & Beyond acknowledged that there was no guarantee its gambit would succeed. And it was viewed skeptically by some analysts.
“This is a last roll of the dice from a company that is desperate to raise cash to provide some financial headroom to pay down debts and keep operations going,” Neil Saunders, managing director in GlobalData’s retail division, said in an emailed statement.
Many investors are likely to stay away because of the retailer’s weak balance sheet, large debt load and continued issues within its core business, Saunders added.
Last February, Bed Bath & Beyond had about 32,000 employees. It has since gone through several rounds of layoffs. In August, the company announced an aggressive restructuring plan, saying that it would close 150 stores and lay off more workers.
Bed Bath & Beyond in August secured $500 million in new financing, including a $375 million loan from the investment firm Sixth Street and an expanded debt facility led by JPMorgan Chase. The retailer disclosed last month that JPMorgan had informed Bed Bath & Beyond that it had defaulted on its debt.
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 & Beyond’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 goose, 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.