What happened
Bed Bath & Beyond (BBBY) was spiraling downward again today after two separate news items sparked concerns about the struggling home goods retailer.
The stock closed down 7.8%.
So what
First, the company said it would sell additional shares under its at-the-market (ATM) program. The company is offering up to $150 million in stock, which would dilute current shareholders by roughly 41% based on its market cap at closing.
The company is in desperate need for cash after losing around $800 million in free cash flow in the first half of the year. And with interest rates rising and its credit rating falling, the retailer is reluctant to tap the debt markets, leaving raising additional equity as arguably its best option.
Management said that proceeds from the offering would be used for general corporate purposes, including strategic priorities like rebalancing inventory and paying down debt. The offering comes two days after the company named interim CEO Sue Gove as permanent CEO, a sign that management may move faster to try to repair the business.
Separately, Bed Bath & Beyond also reported a data breach. It said that a third party had gained access to certain company data through a phishing scam, though it said that it didn't have reason to believe that sensitive information was accessed at this point.
Now what
The sell-off was likely in response to the at-the-market offering since that will significantly dilute current shareholders. The stock could find buyers, and especially if the price continues to fall shares would surely go up if the business stabilized. But it seems like it's going to take more than just a cash infusion to make the business profitable right now, especially with the macroeconomic headwinds facing retailers.
