Bed Bath & Beyond’s hopes hinge on a new bit of financial wrangling that shareholders have the power to yay or nay.
“We are seeking shareholder approval for a reverse stock split to continue raising the necessary capital to fulfill our business goals,” Bed Bath & Beyond CEO Sue Gove said Monday. “We understand the choices we have had to make to improve our liquidity have led to speculation both about our business and our stock. We are taking the necessary steps as part of our financial strategy to sustain and grow our business.”
Monday’s statement addressed issues some investors raised following Bed Bath & Beyond’s plan to hold a special shareholders’ meeting on May 9 to vote on whether the stock deal will move forward. The Securities and Exchange Commission filing about the meeting says the ratio targets the “range of 1-for-10 to 1-for-20.”
Whether investors will vote “yes” remains to be seen. Though equity financing helps companies raise capital, it’s not always what investors want because shareholders are left out in the cold if the company fails. And Bed Bath & Beyond faces new bankruptcy questions given its latest financial challenges.
In the statement, Gove touched on how many outstanding shares Bed Bath & Beyond has, as well as recent talk about “naked short selling” and market manipulation. She suggested that international investors using brokerage houses that limit their ability to cast votes should seek out other brokers.
Gove pointed to the company’s upsides, including that its “20 million and growing Welcome Rewards members” and other customers continue their loyalty to the struggling retailer’s main Bed Bath & Beyond and kid-themed BuyBuy Baby nameplates.
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“We have operated for more than 50 years, and we are determined to deliver for the long-term benefit of our stakeholders,” Gove said.
Industry sources believe that Bed Bath & Beyond is likely to survive a bankruptcy filing because liquidating the company would cut off a crucial source of business for the retailer’s many vendors.
The company got a $120 million supply lifeline with Hilco Global affiliate ReStore Capital. But it needs not just inventory on its shelves, but also the national brands that consumers want, an area where it continues to fall short. Bed Bath & Beyond is facing lawsuits including one filed by ex-CEO Mark Tritton alleging failure to pay some of the $6.8 million in severance it owes him.