Bed Bath & Beyond Shares Trade at High Volume Despite Impending Worthlessness
Bed Bath & Beyond: A Meme Stock on the Brink
Bed Bath & Beyond shares continue to trade at enormous volumes even as the wildly popular meme stock appears weeks away from being declared worthless.
According to Nasdaq data, more than 15 million transactions took place on Aug. 16 in shares of the stricken home retailer. Bed Bath & Beyond filed for Chapter 11 bankruptcy in late April and began closing its brick-and-mortar stores in recent months. Despite multiple cash-raising efforts, the company is struggling to stay afloat.
Its intellectual property was acquired at auction by Overstock, which adopted the Bed Bath & Beyond brand and relaunched the business as an online-only retailer earlier this month. The original company’s physical stores are closed and its assets will be liquidated. Overstock plans to change its stock ticker from OSTK to BBBY in the hope of capitalizing on the long-standing household name.
In its SEC filing in April, Bed Bath & Beyond cautioned that trading in its stock during the ongoing Chapter 11 cases was “highly speculative and poses substantial risks.” The company warned that holders of shares of the common stock could experience a significant or complete loss on their investment.
Bankruptcy Plan Spells Doom for Common Shareholders
The company’s subsequent bankruptcy plan, published on July 20, confirmed that common shareholders would receive no recovery or distribution under the plan. With no hope of recovery, the market cap of $152.25 million for common shareholders essentially becomes worthless. Bondholders have priority over common shareholders and will decide the fate of the company during the plan’s confirmation hearing on Sep. 12.
The lack of positive catalysts and the absence of qualified bids have raised concerns about the speculation surrounding the company’s stock. Retail traders investing in Bed Bath & Beyond may be doing so purely on doomed speculation.
GameStop Chairman Ryan Cohen’s optimism last year regarding the successful Buy Buy Baby unit did not come to fruition. The baby segment’s intellectual property assets were eventually acquired by Dream On Me for just $15.5 million. This suggests that current investors trading in Bed Bath & Beyond’s stock may be left empty-handed.
Bed Bath & Beyond’s stock is down more than 91% since the beginning of the year, closing Wednesday’s trade at $0.21 per share. The cancelation of the common stock has yet to be confirmed, but retail traders are likely to lose their investments.
Cole Smead, CEO and portfolio manager at Smead Capital Management, raised concerns about the destructive nature of meme stock trading and its impact on society. He emphasized the need for regulation to prevent further damage caused by speculation.
Overstock: Oversold and Looking for Growth
Overstock shares closed Wednesday’s trade at $24.22 per share, down 44% from the recent high. However, the stock remains up 25% year-to-date.
Increased downloads of the Bed Bath & Beyond app indicate that the brand recognition is working for Overstock. Michael Pachter, managing director of equity research at Wedbush Securities, believes that Overstock shares are oversold, and the rebranding efforts may boost sales in the future.
Pachter also noted the bleak outlook for the original BBBYQ stock, which represents the bankrupt proceedings. Bed Bath & Beyond’s debt exceeds its assets, leaving little hope for common shareholders. Asset sales may not provide any recovery for investors holding BBBYQ stock.
