As Bed Bath & Beyond Struggles To Avoid Bankruptcy, It Proposes A Reverse Stock Split

According to an announcement made late Wednesday by Bed Bath & Beyond, the retailer is seeking the approval of shareholders in an upcoming special meeting for a reverse stock split as it tries to avoid going bankrupt. 

‍

To raise $300 million in equity from a stock offering announced last week, the retailer's board is asking shareholders to approve a reverse stock split on May 9. 

‍

The stock price of Bed Bath has been on a precipitous decline in recent weeks, trading below $1 on a daily basis, which has hampered its fundraising efforts. The company is worth about $132 million according to its market value, which is around 30 cents per share.

‍

If the plan isn't carried out, the company said that it has concerns that its debts may not be discharged and it may have difficulty staying in business if its doors aren't kept open, as stated in the filing by the company. 

‍

If shareholders reject the reverse split proposal, the Company may have to declare bankruptcy. The Company needs to raise equity capital in order to meet its operating obligations and fulfill obligations under its credit agreement. 

‍

It was reported that the beleaguered retailer stated that the reverse stock split would have a ratio of one-for-ten or one-for-20, which would be determined by the board of directors. By splitting the stock, the remaining number of outstanding shares of common stock would be significantly reduced, which would allow it to issue enough shares of stock to cover the terms of the offering in the event that the split is approved. 

‍

A reverse split may also increase the per-share price of Bed Bath & Beyond's stock, which should attract more investors and enhance the perception of the company's stock. 

‍

As we believe that our Common Stock's current market price may affect its acceptability to certain professional investors and members of the investing public, a higher share price could make our common stock more attractive to a broader range of investors.

‍

It is our belief that a higher share price, in particular, will create an opportunity to attract more institutional investors and investment funds to purchase our Common Stock, which due to its low trading price might prevent them from selecting our stock.

‍

Bed Bath's stock price will end up diluted eventually, even if the reverse split temporarily boosts it. The company announced another stock offering in February, which also diluted its share price. 

‍

A series of dismal quarters has left the home goods retailer clinging to life after it warned of bankruptcy in January. 

‍

In a last-ditch effort to improve sales, Hilco Global provided it with a $120 million lifeline on Wednesday.

‍