Bed Bath & Beyond (BBBY) stock fell as much as 24% after the struggling retailer said it would sell up to $300 million in shares. If the equity offering is not fully consummated, the company expects to file for bankruptcy protection, according to the filing.
Bed Bath & Beyond also posted its preliminary fiscal fourth-quarter sales results, missing analyst expectations. Net sales of $1.2 billion came in below Wall Street estimates of $1.43 billion. Comparable sales declined in the range of 40-50% for the three months ending February 25.
The net proceeds of the stock offering will be used for initiatives such as “investing in merchandise inventory, which will be further supported by a realigned store footprint and cost structure.”
“The actions we’ve taken have enabled us to create the necessary financial runway to begin restoring our iconic Bed Bath & Beyond and buybuy BABY businesses,” Sue Gove, president & CEO of Bed Bath & Beyond, said in a statement.
In February, the ailing home goods retailer announced an agreement with hedge fund Hudson Bay Capital Management to secure $1.025 billion in funding from an equity offering. That move was seen as a Hail Mary pass to stay in business, sending the stock down more than 40% in one day.
In Thursday’s announcement, the company said it is terminating its previous public equity offering. Hudson Bay Capital walked away from its deal with Bed Bath and Beyond as the hedge fund became increasingly concerned about the low stock price ahead of the next round of funding in early April, according to a source.
Bed Bath & Beyond’s new investor, B. Riley Securities, is making its payments weekly rather than the monthly installments Hudson Bay Capital had paid. This will bring in Bed Bath and Beyond capital quicker in an effort to restock inventory.
Bed Bath & Beyond has been a meme stock favorite over the past couple of years. The company is considering a reverse stock-split in the ratio range of 1-for-5 or 1-for-10. The split would drive up the value of shares and perhaps reinvigorate retail interest in the stock. Short interest on the stock is incredibly high, at more than 62% of the float, according to data from S3 Partners.
Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre