• Bed Bath & Beyond share price jumps in the meantime
• Risk of insolvency still not averted
• Analyst predicted the following stock crash
Bed Bath & Beyond stock has been a pawn among investors for quite some time. Within a year, the share certificate hit a high of $30 and a low of $0.2330.
Acute risk of insolvency
The survival of the company is in acute danger: at the end of January, bankruptcy was imminent, only the sale of shares could initially prevent bankruptcy.
The causes of the retail company’s problems are manifold. This is how Bed Bath & Beyond is tackling the current inflationary market environment, which is causing customers to spend less money. However, a large part of the turbulence surrounding the retailer is also of its own making: allegations of nepotism had led to the replacement of the then CEO Steven Temares, and activist investors were heavily involved in the reorganization of the management level. A capital increase and austerity measures should provide the company with fresh capital and get it back on track. The successes were limited, however, and the time to ensure a revival of the business is running out with the remaining capital reserves. According to Reuters, suppliers spoke of payment delays and payment stops, which led to the partial suspension of deliveries.
Stock recovery unsustainable
Against this background, the fact that the Bed Bath & Beyond share had staged a recovery on the floor in the meantime may not have had anything to do with investors’ confidence in a turnaround, but rather thanks to speculators. The company had been targeted by short sellers several times and had become famous as a meme stock. The phenomenon of meme stocks developed in 2021, when investors – spurred on by social media channels like Reddit – had increasingly invested money in struggling companies to force short sellers to short squeeze. The fear of missing out on a massive price increase had caused a real hype for stocks such as GameStop, AMC Entertainment and Bed Bath & Beyond, which was obviously not driven by increased investor confidence in the business development of the meme corporations. Accordingly, the affected stocks were extremely volatile.
Daniela Hathorn, an analyst at Capital.com, took a similar view that even at Bed Bath & Beyond, the prospect of preventing the impending insolvency and improving business was probably not the decisive factor for the recovery from the record low of the share: “In view of the impending bankruptcy, the company’s fundamentals are unattractive to new investors, but renewed social media attention is creating a false sense of demand.” She expected stocks to tumble again, as has happened more often in the past: “As is usual with meme stocks, the uptrend may take a few days to overheat, but an upward move is unlikely to be sustained and when the momentum wanes, the stock will plummet once more.”
In fact, the expert was right: Bed Bath & Beyond shares crashed by around 35 percent to $ 0.30 in Thursday trading on the NASDAQ. In Friday trading, the paper was temporarily 1.63 percent lower at 0.2951 US dollars.
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