Benzinga - Home furnishings retailer Bed Bath & Beyond Inc. (NASDAQ:BBBY) plummeted on Monday after it confirmed that it has filed for Chapter 11 bankruptcy protection. Former hedge fund manager Whitney Tilson weighed in on the development.
What Happened: Tilson, the founder and CEO of investment advisory firm Empire Financial Research, noted that he warned in August 2022 that Bed Bath & Beyond is in a death spiral and is on track for bankruptcy filing due to an inadequate liquidity position to build inventory for the holiday selling season.
"It's certain that the stock is a zero. There will be no miracle like Hertz (HTZ) was," he said.
Tilson was referring to the car rental company Hertz, which successfully emerged out of bankruptcy in July 2021, about a year after filing for Chapter 11.
Bed Bath & Beyond's bankruptcy filing gives the company breathing room to conduct "going-out-of-business" sales at its physical stores and solicit interest from potential buyers for remaining assets, Tilson said.
The former fund manager said he has mixed feelings toward speculators who were getting wiped out. "Generally I think people who behave badly deserve what happens to them," he said.
Tilson also took aim at the SEC for not stopping "Bed Bath & Beyond and its hedge fund accomplices from flooding the market with shares as the company entered its death throes."
Why It's Important: Bed Bath & Beyond's malaise is partly due to industry-wide headwinds amid uncertain economic conditions. The company addressed the adversity by implementing turnaround plans, which unfortunately did not gain much traction.
Tilson noted that being short of cash to run operations, the company struck an "unusual" $1 billion financing deal with a hedge fund in February to avert bankruptcy. The company then scrapped the plan in late March and announced a $300-million common stock offering.
As sales sagged, the stock dipped into penny stock territory in mid-March.
Price Action: Bed Bath & Beyond shares fell 35.67% to $0.1888 on Monday and dipped another 1.32% in after-hours session, according to Benzinga Pro data.
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