- Wednesday’s trading volume hit 939 million – up from a two-month average of 99 million
- The price has jumped into double digits over the past three days despite its bleak outlook
- Meme investor messaging forums reported huge interest in his stock
Shares of Bed Bath & Beyond jumped more than a third on Wednesday after meme traders rallied around the struggling big box store as it prepares for bankruptcy.
The speed of shares traded in Bed Bath & Beyond has exploded since Monday, when more than 336 million were bought and sold. On Tuesday, 300 million shares were traded and on Wednesday, volume hit a staggering 939 million. To put that into context, its average daily volume over the past 65 days is 99 million.
Its price hit 55 cents on Wednesday and has jumped into double digits over the past three days after closing at 24 cents last Friday. The increase comes despite reports this week that it will file for bankruptcy in the coming days after a post-pandemic retail apocalypse swept the country.
The number of posts mentioning the troubled company was “extremely high” and overall sentiment rated “extremely bullish” over the past 24 hours on StockTwits, a social media platform for retail investors.
‘Bullish Maximus!’ said one user mentioning the retailer or next to a rocket emoji.
Meme investors pile in when there’s social media hype, often around a failing company where they can operate collectively to trigger short cuts – forcing those betting against the stock to bail out their positions .
Nearly a fifth of Bed Bath & Beyond shares were sold short by institutional traders. By comparison, less than one percent of Apple shares are sold short.
On Thursday, before market, the stock was down 20%, indicating that this week’s surge could have been more of a pump and dump than a short squeeze.
What is a meme store?
A meme stock refers to the actions of a company that have gone viral.
On messaging forums like Reddit, users can share research on a particular company and why they think it’s a good investment.
The phenomenon emerged during the pandemic when young retail investors, usually young professionals who had money to spend, turned to the stock market to make a quick buck.
Reddit group Wall Street Bets was credited with sending the prize to companies like video game retailer GameStop and movie theater chain AMC.
They were able to exploit the social aspect of their investing to initiate short squeeze strategies by buying shares in companies that institutional investors had thrown away.
A short squeeze occurs when those holding short positions are forced to sell because the cost of holding becomes too high as the price of a stock rises.
Tommy Tranfo, community manager at Stocktwits, speculated that bullish traders may view bankruptcy as the company’s best chance of survival, while bearish investors will also play a role in pushing prices higher.
“The bankruptcy filing often triggers a short hedge recovery, as bearish investors don’t want to risk their profits to try to squeeze the last bit of juice out of the stock,” Tranfo told Barrons.
Once the go-to retailer for wedding gifts, Bed Bath & Beyond recently said it would need to find $300 million in stock sales by April 26 to avoid Chapter 11 bankruptcy, also known as bankruptcy name of “reorganization”.
But as of April 10, the company has reportedly raised just $48.5 million from stock sales. With 178 million shares still available at the time and a Wednesday stock valuation of just 46 cents at the close, selling the rest of its shares would net the retailer no more than $80 million.
Over the past few months, several thousand users of the Zola wedding service platform have removed Bed Bath & Beyond products from their wish lists.
The number of Zola registers with the retailer’s items has more than halved from a year ago, according to Bloomberg.
A New Jersey store manager told Insider that at his peak, about 10 to 12 couples would set up their wedding records at his store each week, each with a total spend of about $7,500 each.
Amazon outpaced the company in the marriage registry market in 2021, claiming almost half the share, according to analysis by investment bank Baird.
The retailer’s collapse could be finalized as early as this weekend, according to the Wall Street Journal. The company also warned that its bankruptcy would mean it would be forced to liquidate its assets.
After several catastrophic years marked by supply chain disruptions and the tragic suicide of its chief financial officer, the retail giant is on the verge of bankruptcy after it has already announced a series of store closures. and layoffs.
The once mighty company has been one of the hardest hit since the pandemic, with early-year reports showing a 40% to 50% drop in store sales for the financial quarter ending in February.
Its collapse came after a period of relative success, where the Covid-19 pandemic saw landlords trapped indoors, causing demand for Bed Bath & Beyond shares to surge.
The company attempted to roll out a series of new products to capitalize on new demand in 2021. But when the retail sector was subsequently hit by supply chain issues, the company’s bold plan has suffered.
Bed Bath & Beyond would lose millions in its unsold stock, triggering a long period of decline that led to reports of impending bankruptcy.
Faced with a poor financial outlook, the company kicked off 2022 with a devastating earnings report that showed its net sales fell 28%, while its net losses soared by more than $75 million.
In April, the company announced that it posted a net loss of $159 million, compared to a profit of $9 million the previous year, according to Retail Dive.
As the company’s finances soared, its chief financial officer Gustavo Arnal, 52, jumped from his 18th-floor apartment to his death in Manhattan in September.
His suicide came days after the embattled retailer announced it was closing stores and laying off workers, alongside news that Arnal – and the company – were being prosecuted on charges of artificially inflating the stock price. of company action in a pump and dump system.
Facing a dire financial outlook, the retail giant has also identified at least 416 U.S. stores and 46 Canadian stores to close by the end of 2023. While it once had more than 1,500 locations across the country, he had previously announced his intention to end the year. with only 480.
Amid reports that the company has gone bankrupt, Bed Bath & Beyond also faces another impending financial deadline.
Lenders Sixth Street Partners and JP Morgan Chase & Co. are reportedly demanding the retailer raise $232 million by June 27.
The struggling company last month also ended a financial deal with hedge fund manager Hudson Bay Capital Management that would have seen the homewares company receive up to $1 billion to fund a Renaissance.
Bed Bath & Beyond is not the only US department store to have fallen on hard times, however, with many iconic brands also announcing a series of store closures.
Nearly 850 big-box stores are set to close by the end of 2023 as retailers are forced into desperate cost-cutting measures.
Walmart, Amazon, CVS, Foot Locker and Macy’s are among the top stores to close locations across the United States.
DailyMail.com has contacted Bed Bath & Beyond for comment.
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