Bed Bath & Beyond (OTCMKTS:BBBYQ) stock is rising 2% today on news that it has delayed its bankruptcy-run sale. The home furnishing retailer has been on its last legs ever since declaring Chapter 11 bankruptcy in April. Two months later, Bed Bath is still teetering on the brink.
However, with potential buyers interested in acquiring some of its last remaining assets, the company has pushed pause on hitting the self-destruct button. This may tempt some retail investors into thinking the unstable meme stock can turn around. But even though this development has pushed BBBYQ stock into the green today, this doesn’t mean the company can be saved.
The end is still approaching for Bed Bath & Beyond. Delaying the inevitable doesn’t make shares a buy.
What’s Happening With BBBYQ Stock?
Bed Bath & Beyond hasn’t seen a positive catalyst since even before it delisted from the Nasdaq and started trading over-the-counter (OTC). While some retail investors have refused to give up on BBBYQ stock, their faith remains as misguided as ever. With BBBYQ up about 2% as of this writing, investors should be careful to recognize the latest development in this company’s tragedy for what it is.
Further delaying the bankruptcy sale signals that Bed Bath is making progress in reaching a deal. Most likely, the potential deal concerns the acquisition of its Buy Buy Baby franchise. That wouldn’t be surprising, either. Go Global Retail, an investment firm specializing in retail and fashion, expressed interested in purchasing Buy Buy Baby earlier this week. Bed Bath could also be fielding an offer from Overstock.com (NASDAQ:OSTK) to acquire the Bed Bath & Beyond intellectual property (IP) rights.
Both of these offers would make sense for the companies behind them, but neither would make BBBYQ stock a good buy. As InvestorPlace recently reported, Bed Bath & Beyond is dying and the vultures are circling.
InvestorPlace’s Thomas Yeung has issued a similar take on the company, referring to Bed Bath as a “dying retailer getting sold for parts.” Yeung provided further context as to why investors should avoid BBBYQ stock:
“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. (Owned stores work the opposite way, where equity values are understated).”
Why It Matters
Today’s news further confirms Yeung’s description of this failing retailer. Like some other meme stocks, this is a geriatric company that has failed to adapt to a changing economy. Even short squeeze pressure and high retail investor interest couldn’t save shares.
Investors should have abandoned ship when BBBYQ stock began trading OTC. The investors who didn’t will keep paying the price until they sell. And that window to sell is getting smaller, even as Bed Bath delays its bankruptcy sale.
When a stock like BBBYQ rises, investors may be tempted to hope for a turnaround. But like most meme rallies, today’s gains are being driven by superficial hype that will soon subside.
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On the date of publication, Samuel O’Brient did not hold (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.
