(Bloomberg)—Hudson Bay Capital Management is the anchor investor of the share sale launched Tuesday by Bed Bath & Beyond to stave off bankruptcy, according to people with knowledge of the matter.
The embattled retailer lined up investors for an eleventh-hour cash infusion that would allow it to keep operating outside of Chapter 11 protection, Bloomberg previously reported.
Hudson Bay, a New York-based multi-strategy hedge fund, comprised the largest order among several institutional investors that helped Bed Bath & Beyond enter into the transaction Tuesday, said the people, who asked not to be named discussing private company information. B. Riley Securities Inc. arranged the deal.
The company gathered orders from institutional investors to cover the full offering, which will ultimately raise more than $1 billion. Bed Bath and Beyond also worked with advisers from Kirkland & Ellis, Lazard and AlixPartners.
The deal likely gives the company some breathing room to avert an imminent financial crunch. At the same time Bed Bath & Beyond warned in a securities filing on Monday that it might have to file for bankruptcy protection even if the offering is completed.
The company tumbled as much as 48% Tuesday with one analyst cutting their price target to $0.
Bed Bath & Beyond's Ups and Downs | Retailer's stock sees largest decline follow largest gain
In a statement, a Bed Bath & Beyond spokeswoman declined to comment beyond the company’s filings on Monday when the equity offering was announced. A representative for Hudson Bay declined to comment, as did a representative for B. Riley Securities.
“Trading in our securities is highly speculative,” the company said in the Monday filing. It also warned the firm “may not be successful in implementing our transformative plan, including building back our inventory and increasing customer sales, and we have historically underperformed in implementing management plans.”
Bed Bath & Beyond attracted the attention of meme-stock traders in early 2021, and its share price has proved especially volatile ever since the company indicated it was preparing for a potential bankruptcy filing. Shares had surged by a record 92% on Monday as of the close, ahead of Tuesday’s decline.
The home-goods retailer will use its fresh cash to rebuild merchandise, it said, as the difficulty in maintaining sufficient inventory has contributed to its poor sales.
But even with a fresh financial cushion, the new funds could end up simply extending the company’s long decline given a vanishing customer base and the cost of re-stocking. Add a battle to win trust from suppliers, and a turnaround plan is looking like a long shot.
--With assistance from Jeannette Neumann.
© 2023 Bloomberg L.P.
