Bed Bath & Beyond Inc’s salvation from the verge of bankruptcy last month is now threatened by the retailer’s plunging stock price. The company received $225M in upfront funding from hedge fund Hudson Bay Capital. Over the next eight months, it committed to investing another $800M. It was characterized as a “transformative transaction” by Bath & Beyond Chief Executive Officer Sue Gove on February 7, giving the firm time to reorganize.
However, there are strings attached to the extra money. According to a regulatory document, future injections depend on Bed Bath & Beyond keeping a $1.50 or $1.25 weighted average stock price, depending on time. Hudson Baycano abandons the deal’s terms if it so desires.
Nonetheless, maintaining a stock price above the thresholds may be difficult. Since February 6, it has fallen more than 70% and dropped to $1.41 on Tuesday. The stock closed Thursday at $1.56 per share.
Examining previous steps that added flames to the stock fire
The rescue has put pressure on the stock in part. Hudson Bay obtained permission to transform its introductory investment into regular stock at a lower price than what the market value was at the initiation of the operation. This allowed consumers to make fast cash by selling their stock.
Investors quickly recognized the risk that the financing would swamp the market with stock. The market value of the remaining shares would be harmed. Consequently, once the transaction was unveiled, the price sank steadily.
Bed Bath & Beyond obtained rescue funding in February to avoid going bankrupt.
The firm pledged its assets to credit fund Sixth Street Partners in August in order to obtain a $375M loan. During the three months ending in late November, the company lost $393M. Bed Bath & Beyond had begun bankruptcy proceedings by January when the money was gone.
In connection with Hudson Bay’s equity deal, Sixth Street provided a fresh $100M this time around. The potential of the arriving $800M may determine Bed Bath & Beyond’s future. This will put the corporation’s destiny in the hands of its stock price.
COMMENTS