Mattress Bathtub & Past is going through chapter and looking for a reverse inventory cut up
A customer exits a Bed, Bath and Beyond store in Oakland, California on August 31, 2022.
Justin Sullivan | Getty Images
bed bath beyond wants shareholders to approve a reverse stock split at an upcoming special meeting as the retailer continues to work to avoid filing for bankruptcy, according to a securities filing late Wednesday.
The retailer’s board of directors is asking shareholders to approve the reverse stock split at the May 9 meeting so that enough shares are available to raise up to $300 million in equity from a stock offering announced last week.
Bed Bath’s fundraising efforts have been hampered by the plummeting share price, which has posted a steep decline to trade below $1 for the past few weeks. Bed Bath’s shares were trading around 30 cents Thursday morning, giving the company a market value of about $132 million.
The company is concerned that if the plan doesn’t go through, it likely won’t have enough equity to pay off its debt and keep its doors open, the company said in the filing.
“The company may not be able to avoid bankruptcy if the reverse split proposal does not receive shareholder approval. We need to raise equity to have the necessary cash to fund operations and service obligations under our loan agreement,” the filing reads.
The struggling retailer said the reverse stock split would be at a ratio of 1-for-10 to 1-for-20, to be determined by the board. If approved, the split would significantly reduce the number of outstanding common shares available, allowing the Company to issue enough shares to satisfy the terms of the offering.
The reverse split could also increase Bed Bath’s price per share, which the company believes could improve perceptions of its stock and attract more investors.
“We believe that a higher stock price could make our common stock more attractive to a broader range of investors, as we believe the current market price of our common stock could affect their acceptance by certain professional investors and other members of the investing public,” the filing says.
“Specifically, we believe that an increased share price would allow us to attract additional institutional investors and mutual funds that may not consider purchasing our common stock due to our low trading price.”
But even if the reverse split temporarily boosts Bed Bath’s stock price, the stock offering will ultimately dilute it, which happened after the company announced another stock offering in February.
The housewares retailer has been warning of bankruptcy since January after a series of dismal quarters drained the company’s cash and kept it alive.
On Wednesday, the company announced a $120 million lifeline being provided by bankruptcy trustee Hilco Global so it can get inventory back on its shelves in a last-ditch effort to boost sales.
– CNBC’s Jesse Pound contributed to this report.