A customer leaves the Bed, Bath and Beyond store on August 31, 2022 in Oakland, CA.
Justin Sullivan | Getty Images
A shower in bed and more wants shareholders to approve the reverse stock split at an upcoming special meeting because the retailer continues to work to avoid filing for bankruptcy, in response to securities filed Wednesday.
The retailer’s board of directors is urging shareholders to approve the reverse stock split at its May 9 meeting to have enough stock available to boost as much as $300 million in equity from the stock offering announced last week.
Bed Bath’s fundraising efforts have been hampered by the declining share price, which has plummeted and traded below $1 for the past few weeks. Bed Bath shares traded at around 30 cents Thursday morning, giving the corporate a market value of about $132 million.
The corporate is concerned that if the plan is not accomplished, it likely won’t have enough capital to repay its debts and keep its doors open, the corporate said in a filing.
“The corporate may not give you the chance to avoid bankruptcy if the reverse split proposal is not approved by shareholders. We’d like to boost equity to have the money needed to finance the operations and obligations under our loan agreement.
The beleaguered retailer said the reverse stock split would happen at a ratio to be determined by the board of directors starting from 1 for 10 to 1 for 20. If approved, the split would significantly reduce the variety of outstanding common shares available, allowing enough variety of shares to cover the terms of the offer.
The reverse split could also raise the worth per share of Bed Bath, which the corporate believes could improve the perception of its shares and attract more investors.
“We consider a higher share price may make our Common Shares more attractive to a wider range of investors as we consider the present market price of our Common Shares may affect their acceptability to some skilled investors and other investors,” the filing says.
“Particularly, we consider that a share price increase would enable us to draw additional institutional investors and mutual funds who may not consider purchasing our common stock as a consequence of our low transaction price.”
Still, even when the reverse split temporarily boosts Bed Bath’s share price, the share offering will eventually dilute it, which happened after the corporate announced one other share offering in February.
The homeware retailer has warned of bankruptcy since January after a series of dismal quarters drained the corporate’s liquidity and left it afloat.
On Wednesday, it announced a $120 million lifeline provided by liquidator Hilco Global so it could reclaim shelf stock in a last-ditch effort to spice up sales.
– Jesse Pound of CNBC contributed to this report.