Bed Bath & Beyond Files Notice for a Potential Reverse Stock-Split

Bed Bath & Beyond has submitted a securities filing stating that it is seeking shareholder approval for a reverse stock split at a May 9 special meeting. The move would enable it to raise up to $300 million in equity from a stock offering announced last week, which could help the retailer stave off bankruptcy.

“The company may be unable to avoid bankruptcy if the reverse split proposal fails to obtain shareholder approval,” said Bed Bath & Beyond in the filing. “We need to raise equity capital to have the necessary cash resources to fund operations and service obligations under our credit agreement.”

Bed Bath & Beyond’s stock has been trading under $1 for several weeks, falling as low as 31 cents as of April 7. The reverse split would significantly reduce the number of outstanding shares of common stock available. This could boost its per-share price, improve the perception of the stock and attract new investors.

“The board believes that the expected increase in the stock price as a result of the Reverse Stock Split would help increase broker interest in common stock,” said Bed Bath & Beyond. “We believe a higher share price could make our common stock more attractive to a broader range of investors, as we believe that the current market price of our common stock may affect its acceptability to certain professional investors and other members of the investing public. In particular, we believe that an increased share price would enable us to attract additional institutional investors and investment funds who may not consider purchasing our common stock due to our low trading price.”

The reverse split would be the latest in a number of steps Bed Bath & Beyond has been making to keep afloat. Other recent developments include:

• Securing investor backing for more than $1 billion in capital, with commitments to raise $225 million of equity capital, initially by selling convertible preferred shares, with the remainder coming over time by issuing warrants that will require holders to purchase more preferred shares in the future;
• Closing all Harmon stores, as well as a number of Bed Bath & Beyond and BuyBuy Baby locations, and winding down its Canadian operations; and
• Laying off an unspecified number of workers across its corporate, supply chain and store portfolio and eliminating the Chief Transformation Officer role.