Let’s not mince words here. Even if you like to gamble, Bed Bath & Beyond (OTCMKTS:BBBYQ) stock simply doesn’t offer a favorable reward-to-risk scenario. Even if they’re only considering a small, speculative share position, financial traders should still avoid Bed Bath & Beyond.
Bed Bath & Beyond was a darling among meme stock traders in 2021. However, fundamentals-focused investors generally didn’t take Bed Bath & Beyond seriously.
Their skepticism turned out to be 100% justified. I once recommended taking a short position against Bed Bath & Beyond, and that trade worked out well. Today, your best bet is just to steer clear of Bed Bath & Beyond entirely.
| BBBYQ | Bed Bath & Beyond | $0.23 |
From BBBY Stock to BBBYQ Stock
During Bed Bath & Beyond’s last days on the Nasdaq exchange under ticker symbol BBBY, rumors circulated on social media that someone or something would miraculously rescue the company and its shareholders. As the old saying goes, hope springs eternal.
The perma-bulls could only remain optimistic for so long, though. In April, Bed Bath & Beyond officially filed for Chapter 11 bankruptcy protection. This was practically inevitable, as Bed Bath & Beyond has been deeply unprofitable and burdened with considerable debt.
Also in April, Bed Bath & Beyond was delisted from the Nasdaq exchange and resurfaced on the over-the-counter (OTC) markets via ticker symbol BBBYQ. This makes me think of “BBQ” or barbecue because the company and its hopeful stockholders really got skewered and cooked.
Will Anyone Attend Bed Bath & Beyond’s Funeral?
Meme stock traders have moved on to other opportunities, it seems. They’re not mourning the loss of Bed Bath & Beyond as a former retail icon. Like Toys ‘R’ Us and Blockbuster video, Bed Bath & Beyond will soon be little more than a punchline and perhaps an object lesson for all retail businesses.
There is a glimmer of renewed hope as a couple of businesses have reportedly expressed interest in some or all of Bed Bath & Beyond’s assets. It’s been an ongoing soap opera with various developments and disappointments.
First, there were reports that Bed Bath & Beyond’s debtors had until June 8 to “select a stalking horse bid or bids for some or all of Bed Bath’s assets.” There was also talk of an unknown mystery bidder. However, June 8 came and went, and no verifiable deal has materialized, so far.
Then, there were reports that Overstock.com (NASDAQ:OSTK) expressed interest in purchasing Bed Bath & Beyond’s intellectual property. Also, Go Global Retail reportedly may be interested in acquiring Bed Bath & Beyond subsidiary Buybuy Baby.
I tend to concur with Samuel O’Brient’s assessment. “Even if Bed Bath & Beyond were to have a second life as a brand sold at a discounted rate on Overstock.com, it wouldn’t save BBBYQ stock. At this point, there can be no doubt that the company has failed,” he said.
If Bed Bath & Beyond couldn’t attract enough customers and generate sufficient sales before, it’s unlikely that shoppers will suddenly flock to Bed Bath & Beyond’s products via Overstock.com. Besides, even if Bed Bath & Beyond gets wholly or partially acquired, that’s no guarantee of value for the shareholders, as Thomas Yeung explains:
“Retailers require significant markdowns to liquidate excess inventory, and the value of rented physical stores is usually far lower than stated. A $200,000 store renovation for Bed Bath & Beyond, for example, doesn’t increase a building’s value to a bowling alley or grocery store that takes its place.”
Yeung concludes, “[E]ven a successful auction of Buy Buy Baby will unlikely make shareholders whole.” That’s not something that Bed Bath & Beyond’s stakeholders probably want to hear, but it’s a reality they may have to face.
It’s a Countdown to Destruction for BBBYQ Stock
I’ve offered some harsh opinions today, but I genuinely feel bad for Bed Bath & Beyond’s investors. Social media commentators got them hyped up and hopeful, only to end up disappointed and lighter in the wallet.
The soap opera surrounding Bed Bath & Beyond will continue for a while, but don’t expect a happy ending for anyone involved. Even a partial or full buyout of Bed Bath & Beyond’s assets doesn’t ensure success for BBBYQ stock investors. Therefore, there’s no need to go long or short; it’s perfectly fine to just stay away completely.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.