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Bed Bath & Beyond’s Legal Move Makes Bankruptcy Look More Likely Than Not

Troubles continue to mount for struggling Bed Bath & Beyond. The home goods retailer reported that it received a notice on Jan. 12 stating that the company wasn’t in compliance with the requirements for listing on the Nasdaq stock exchange since it has not filed its quarterly report on Form 10-Q with the Securities and Exchange Commission (SEC). The failure to report violates Nasdaq Listing Rule 5250(c)(1).

CNBC also reported that Bed Bath & Beyond retained the legal services of Cole Schatz, which has a sizable bankruptcy and restructuring practice and steered Christopher & Banks through its Chapter 11 collapse last in 2021. A rep for the Hackensack, N.J.-based law firm, just 24 miles down the Garden State Parkway from Bed Bath & Beyond’s Union headquarters, declined to comment.

Bed Bath & Beyond has 60 calendar days from issuance of the Nasdaq notice—March 13, 2023—to submit a plan to regain compliance with the listing rule. If Nasdaq accepts that plan, the retailer may possibly receive up to 180 calendar days, or a deadline of July 10, 2023, to file its quarterly report to regain compliance.

“The company continues to work diligently to finalize its quarterly report and plans to file its quarterly report as promptly as possible to regain compliance with the listing rule,” Bed Bath & Beyond said in a statement posted on its investor relations website.

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The notice sent Bed Bath & Beyond’s stock in free fall once again, dropping 9 percent on Friday to $3.45.

The delisting comes as Bed Bath & Beyond seems on the path toward bankruptcy. Just over a week ago, word came that the retailer was meeting with private equity firm Sycamore Partners, which may purchase assets such as the company’s slightly more profitable BuyBuy Baby brand.

The retailer also brought on Berkeley Research Group LLC as a restructuring advisor, and it has been working with investment banker Lazard Ltd. and law firm Kirkland & Ellis LLP on potential bankruptcy strategies.

Earlier this month, Bed Bath & Beyond announced dismal third-quarter sales for fiscal year 2022, with a 33 percent net decline and a comparable sales drop of 32 percent. During its earnings call, CEO Sue Gove said the company would continue its store closing plan while also enacting layoffs and other cost-cutting measures at the corporate level.

Bed Bath & Beyond is among around 40 companies that Nasdaq has pending suspension or delisting. Along with failing to meet reporting requirements, companies can be delisted for a number of reasons, including going private and most commonly, having their stock price fall below the exchange’s minimum price of $1.

Delisting often serves as a bellwether of significant financial problems, as in the recent case of Party City, which received a noncompliance notice from the New York Stock Exchange in December and filed for bankruptcy last week.