18 ms·

I find the whole situation fascinating. Bed Bath continued to sell hundreds of millions of shares while they were preparing for bankruptcy and retail investors

• cush 3y ago
  What's Matt Levine's take?
  • bonzini 3y ago
    Probably https://www.bloomberg.com/opinion/articles/2023-03-30/bed-bath-beyond-has-more-stock-to-sell https://www.bloomberg.com/opinion/articles/2023-03-30/bed-ba...
    • toomuchtodo 3y ago
      https://archive.is/svqGg https://archive.is/svqGg
  • exsf0859 3y ago
    He's covered the decline of BBBY many times in his newsletter, explaining the financial details and shaking his head each time. His Monday April 24th, 2023 newsletter, titled "Bed Bath Moves Beyond", covers the situation once again. It ends: "Bed Bath saw that its retail shareholders wanted to throw their money away, and that its sophisticated lenders wanted to get their money back, and realized that there was a trade to be done that would make everyone, temporarily, happy. So it did the trade. It’s amazing. The lawsuits are gonna be great."
    • mrguyorama 3y ago
      >The lawsuits are gonna be great. Why can you be sued because idiots convinced themselves you were a good buy while you were showing everyone your terrible finances?
      • vkou 3y ago
        Because you aren't allowed to sell stock in advance of your bankruptcy filing. BBBY did this in a roundabout way, by signing a deal with HBC, where HBC sells BBBY stock in exchange for cash...
      • justincormack 3y ago
        Everything is securities fraud, as Levine likes to say.
    • Sniffnoy 3y ago
      Could you link it, instead of just quoting it?
• bookofjoe 3y ago
  >I assume Bed Bath did all the paperwork that is necessary (like calling out risks, that the raised capital will go to creditors first, etc) for such a stock sale. I'm not clear on why your next sentence is: >But it is clear they were doing it out of bad-faith to the new investors. Where is the "bad-faith" in caveat emptor?
  • bombcar 3y ago
    You know those Prop 65 warnings you see on everything? It's the difference between a company sticking it on everything "just in case" and a company with the CancerTron-9000™ rebranding as "edible low-fat sweets" with that label on it. Every single filing with the SEC contains language that is basically 'holy shit we could go bankrupt tomorrow because billions of reasons' - that's different from "we know we're going down, but we can fleece people on the way down" - though it will be hard to prove criminally in a court for BBB and GameStop, likely.
    • cratermoon 3y ago
      My favorite of the moment is 'gluten free'. Seen on things that physically cannot have gluten in them, unless it's contaminated somehow.
      • hef19898 3y ago
        It started with vegan and then lactose free. But hey, free marketing for a ton products, right?
        • slaw 3y ago
          I remember times when everything was cholesterol free. I even started joking I am buying cholesterol free gasoline.
        • cratermoon 3y ago
          Way back in the day, it was "sugar free". There was much less shady labelling before the Reagan era, so it wasn't common, but there were a few things so marketed even though they had never had sugar before. Today I usually only see "no added sugars".
• kube-system 3y ago
  I have a hard time feeling sorry for any retail investors who made the decision to buy BBBY on their own.
  • draw_down 3y ago
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• gizmo 3y ago
  Bed Bath followed the email scammer strategy of making their scam so obvious only the most financially illiterate people could fall for it. Hard to pull of, but once you've got an investor base that's willing to believe anything you can dilute them repeatedly and they'll still believe it's 5D chess.
  • BaseballPhysics 3y ago
    Eh, frankly, I think that does a disservice to the people buying the stock. Were a bunch of people buying into the meme stock hype? Sure. Does that make them financially illiterate? Well, the folks who bought Hertz sure look pretty damn smart in hindsight even though at the time they were being described in similar ways, so... who's to say if they are illiterate or just have a different view of value and risk?
    • dragontamer 3y ago
      You can be right for the wrong reasons. You can be wrong for the right reasons. You can be right for the right reasons, you can be wrong for the wrong reasons. The problem with being "right for the wrong reasons", is that your logic fails to apply to future situations. The "wrong reasons" in this case, is the obvious ego-tickling / ha ha the other people were wrong that's obviously intrinsic to the gambling / meme stonk trading culture. I'm sure it feels good when you're right for the wrong reasons, but I don't think it leads to long term success. ("Royal You", not you in particular, if you don't mind). But yes, it does feel good to be a contrarian and win due to dumb luck. But I'm not sure how many times "Hertz" situations will pop up in the future. I think this ego-tickling / contrarian mindset is at the root of this behavior, at least based on the discussions I have in my social circle / meme stock traders I'm aware of. ----------- There's also "wrong for the right reasons", which is my preference in general. You generally want to be wrong today, if it means that your logic holds for most future cases.
      • jraby3 3y ago
        A simpler way to say this is you can have a correct bet and a bad outcome and an incorrect bet and a good outcome. If I were to offer you $1 for heads and $3 for tails and you chose heads and lost, I’d win the bet but it’s still a bad bet.
• morkalork 3y ago
  Bed Bath and Beyond the Pale
  • beiller 3y ago
    Bed Bloodbath and Beyond
    • myhf 3y ago
      Bye Bye, Baby
    • fknorangesite 3y ago
      This the new Doom DLC?
• fullshark 3y ago
  What was the premise behind buying a stock for a company headed for bankruptcy?
  • deleted 3y ago
    [deleted]
  • dragontamer 3y ago
    Meme stock traders thought they had another Hertz coming. Hertz was going into bankruptcy in 2020, as the pandemic wrecked their finances. But then in 2021, in the middle of the bankruptcy, it turned out that their fleet of millions of used cars skyrocketed in price, saving the company from bankruptcy. Some other company purchased Hertz before the bankruptcy finished and Hertz shareholders then reaped the rewards as the stock climbed from pennies into $7.
  • pram 3y ago
    Profiting from a short squeeze. They basically load up on the shit stock like lottery tickets because they believe the price will eventually skyrocket. This is why they’re willing to delude themselves for months and years.
  • jutrewag 3y ago
    [dead]
  • vkou 3y ago
    Through a combination of divination by star signs and chicken entrails, reddit determined that the bankruptcy is fake, the business is actually amazing, and the only reason everyone thinks the company is doomed is because it is being shorted by bad people. If they just buy and 'hodl', the shooters will get squeezed, and all the holders will make infinity dollars. After buying mountains of stock, they've come up with insane theories for why this isn't a real bankruptcy, why some angel is going to come in at the eleventh hour to rescue their BBBY and how they will all get 1:1 shares in the angel's firm. It's flat earth/rapture insanity, except these people are financially invested into their delusions.
    • 3y ago
• patrickthebold 3y ago
  Random thought and I figure there must be a law against this: But what about the opposite, could a company sell off it's assets and do stock buy backs right until it goes bankrupt so that some investors get more $ ahead of the creditors?
  • bombcar 3y ago
    There are various tricks around this area (the Texas Two-step is a favorite) but most of the blatant ones have clawback possibilities. https://en.wikipedia.org/wiki/Texas_two-step_bankruptcy https://en.wikipedia.org/wiki/Texas_two-step_bankruptcy
    • silisili 3y ago
      I don't see how this isn't illegal, or more pointedly, why everyone isn't doing it if it is legal? So you can just write off liabilities into a new company? Why wouldn't every company do this every year?
      • 0x457 3y ago
        Well, it is illegal to do anything ahead of bankruptcy that would have the effect of preferring shareholders to creditors. You can't just spin off your debt into a new company and declare bankruptcy as you wish, courts are involved, things must be approved. Clawback exists.
  • criddell 3y ago
    I've thought about that before. Would it be technically possible for a company to buy all of its shares back so that there are no owners? The company would be self-owned.
    • chimeracoder 3y ago
      > Would it be technically possible for a company to buy all of its shares back so that there are no owners? The company would be self-owned. No, because there's a statutory minimum number of shareholders (which varies by country but is always greater than zero). But even if this weren't the case, it wouldn't be as weird as it sounds. In most states, nonprofits cannot issue stock, but they still exist as corporate entities. The directors ultimately control the company. Shareholders are secondary: irrelevant, except insofar as they can vote out the board of directors.
• dilyevsky 3y ago
  I think you’re wrongly assuming that the point of meme stock “investing” is to make money - quite the opposite actually
• neurobama 3y ago
  The whole stock market in 2023 makes no sense to me, not just Bed Bath and Beyond. So many companies no longer pay dividends. So many classes of stock are now non-voting shares. Common stock shareholders usually get nothing if a company goes bankrupt and liquidates. So if I don't get dividends, can't vote, and am not entitled to a share of the company's assets, what is the actual value in owning stock? Do I just wait for the share price to go up, sell at the peak, and pass my shares on to the greater fool? That's starting to smell a lot like the worst sort of crypto trading.
  • itake 3y ago
    My understanding is buybacks are better than dividends for tax purposes, because with dividends you pay income tax and buy packs you pay capital gains.
    • HDThoreaun 3y ago
      Dividends pay the exact same tax rate as selling stock which is how you make money from buybacks. The difference is that buybacks allow you to take the income in the future and shift the tax burden timing. Both dividends and stock selling are normal income tax rate if you've held the stock for less than 6 months and capital gains rate if you've held for more.
      • malfist 3y ago
        Selling stock isn't entirely how you make money from buybacks. Buybacks inflate the stock price, making what you're holding more valuable, even if you don't sell. More valuable assets are useful for all sorts of things, including leveraging them for other activities, or selling them for capital gains.
        • HDThoreaun 3y ago
          Absolutely can get into all that, buybacks definitely are better for tax purposes, but saying "buybacks are taxed at capital gains rate and dividends are income tax rate" is not correct
• dna_polymerase 3y ago
  Another relevant piece by Matt Levine is about Hertz, who were in a similar situation in 2020 iirc: https://www.bloomberg.com/news/newsletters/2021-05-12/money-stuff-the-hertz-gamblers-were-right?sref=CJIxiccg https://www.bloomberg.com/news/newsletters/2021-05-12/money-...
• d136o 3y ago
  I wonder how much of it is explained by all the company retirement plans that are set to auto invest via an index fund. They says it’s retail meme stock buyers… but what if it’s everyone who doesn’t have time to look at things and these publicly traded companies are now just selling into those reliable biweekly/monthly retirement account contributions.
  • andylei 3y ago
    BBBY is not in any major indices
• adam_arthur 3y ago
  They didn't sell nearly enough shares. They could have probably saved their business, at least in the short term, by selling more. Their shares outstanding barely increased even as the price rocketed unjustifiably higher on meme energy. I'm consistently amazed by the poor management by CFOs of companies not selling shares when their P/E or even P/S multiples are 100x+. This is 100% free and exploitable money available to businesses, that quite clearly won't last into perpetuity. NVDA should be selling 10%+ of their share count into the market at this price. You can buyback the shares later when the price will, inevitably, and quite obviously materially fall. You could immediately put the money into a MMF yielding 5% rather than the current 1% earnings yield. There's just obvious, no brainer stuff here for many CFOs to take advantage of. Looks like BBBY share count has declined materially over the past decade, which was quite surprising. Goes to show that buybacks mean nothing for shareholder returns until you sell. And the buyback itself is a disposal of cash on hand (or accrual of debt), so is price-neutral in the immediate term. Who wants to bet that BBBY would rather have the cash right about now? https://www.macrotrends.net/stocks/charts/BBBY/bed-bath-beyond/shares-outstanding https://www.macrotrends.net/stocks/charts/BBBY/bed-bath-beyo...
  • FormerBandmate 3y ago
    It takes a lot of time to authorize share sales. When you do that it tanks the stock. AMC tried to at $80 and got voted down so had to go through several hoops which caused massive declines. Elon Musk is one of the only people who's ever made it work, and his sales of Tesla stock are largely responsible for its current success
    • adam_arthur 3y ago
      You can authorize future share sales well ahead so that you're already prepared. Many companies have consistent authorization to sell into the market when they feel timing is right. It's a common way that BDCs and REITs grow. If the stock is trading well above NAV, selling shares is accretive to shareholders. Buybacks above NAV/fair value are dilutive (which clearly was the case with BBBY) You can also sell in blocks to private acquirers if anybody bites. But the first approach is better if it's a meme situation (no rational buyer would take a block of shares close to market). Clearly there are many companies that could have and likely still can sell large blocks of shares close to market, NVDA being one example. "A shelf offering allows a company to register its securities with the SEC but then delay putting them on the market for a period of up to three years. This provides some advantages, as the company can time the release of its securities, ideally aligning the issuance with favorable market conditions. Shelf offerings can also help companies save on the registration process, as they do not have to re-register each time that they release new shares." from Investopedia Somehow people confused this all along the way and simply equated "buybacks = good". Its about what value you get for the shares you're buying/selling. That's it. Buying back your shares at a 30x+ earnings multiple is going to be a terrible allocation of capital for most companies in the long run
• Sniffnoy 3y ago
  > As usual Matt Levine's take on this is a good read. Link?
  • polygamous_bat 3y ago
    He regularly writes a column on Bloomberg called Money Stuff, you can see a few examples of him talking about BBBY here: https://www.bloomberg.com/opinion/authors/ARbTQlRLRjE/matthew-s-levine https://www.bloomberg.com/opinion/authors/ARbTQlRLRjE/matthe...
    • Sniffnoy 3y ago
      Sure, but I was hoping that the commenter above would link the particular piece they had in mind rather than just referring to it.
• marksmith2996 3y ago
  The confusing thing is that they waited until the stock was under a dollar to do an offering. Had they done at $20 just like 6 months ago they probably could have paid their debts.
• paulpauper 3y ago
  Bed Bath continued to sell hundreds of millions of shares while they were preparing for bankruptcy and retail investors (or meme stock investors) continued to buy them. That is how markets work. Buyer must match seller. Meme stock investors are only a small % of buyers. Others are funds.
• BeFlatXIII 3y ago
  That's why I call it the stock market casino. Don't invest what you can't afford to lose.
  • patriciaaa 3y ago
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