November 16, 2019 -

POST POSITIONS AND TARGETS

BBBY Update #1: ATM Share Offering Up to 12M Shares (as per PR) (link to SEC filing)

BBBY Update #2: Bed Bath & Beyond Inc. Announces Strategic Changes to Strengthen its Financial Positioning, Drive Growth and Better Serve Customers

November 30, 2019 -

Shop Bed Bath & Beyond.com || Shop buybuyBaby.com || Shop Harmon.com

BBBY Investor Relations

Q2 EARNINGS CALL

Company held a premarket Q2 Earnings Call on 9/29/22 and highlighted:

• Liquidity of approximately $850M as of fiscal September, reflecting recently expanded $1.13 billion ABL facility and new $375M FILO loan.

• At-the-Market ("ATM") Offering of 12M shares (completed as of 10/24/22 raising $75M).

• Company indicated working on liability management transactions. Later they announced an exchange offering for their outstanding 2024, 2034, and 2044 bonds to reduce BBBY's debt and interest expenditure. The Exchange Tender deadline is 11/15/22.

As previously announced with the Company's Strategic Update Call/Presentation on 8/31/22, the Company is maintaining the following outlook parameters for fiscal 2022:

• Comparable sales decline in the 20% range driven by improvements in the second half of fiscal 2022 versus the first half of fiscal 2022

• Adjusted SG&A expenses ~ $250M below last year, reflecting cost optimization actions occurring in the second half of fiscal 2022

• Capital Expenditures of ~ $250M vs. the ~ $400M previously planned for fiscal 2022

--> The Company anticipates breakeven operating cash flow by the end of fiscal 2022 <--

RECENT EVENTS

• Another share offering of up to $150M was recently authorized. BBBY intends to use the proceeds from this offering to "drive immediate strategic priorities such as rebalancing our assortment and inventory, and addressing our debt."

• CEO Sue Gove hosted a vendor summit during which she remarked: "our accounts payable has been cleaner than its ever been," and said "we don’t think there is bankruptcy on our horizon.”

• CFO Gustavo Arnal passed away 9/2/22 from apparent suicide. He sold a ~50k portion of his >250k shares on 8/16 & 8/17 (this was pre-planned in April).

• BBBY was put on the Reg SHO Threshold List from 8/16 to 8/31/22 during which BBBY caught a lot of social/mainstream media attention.

• Ryan Cohen bought shares Jan 2022 through March amounting for 9-11% of outstanding shares. He sold the entire stake on 8/16 and 8/17/22 for unclear reasons. Many suggestions in his letter to the board were met/evaluated.

• CEO Mark Tritton resigned; Sue Gove served as interim CEO and later was voted in formally. Before that, new board members were voted in during 7/15/22 Annual Shareholder meeting (3 of 10 seated by RC Ventures).

October 14, 2019 -

Shop Bed Bath & Beyond.com || Shop buybuyBaby.com || Shop Harmon.com

BBBY Investor Relations

Q2 EARNINGS CALL

Company held a premarket Q2 Earnings Call on 9/29/22 and highlighted:

• Liquidity of approximately $850M as of fiscal September, reflecting recently expanded $1.13 billion ABL facility and new $375M FILO loan.

• At-the-Market ("ATM") Offering of 12M shares (completed as of 10/24/22 raising $75M).

• Company indicated working on liability management transactions. Later they announced an exchange offering for their outstanding 2024, 2034, and 2044 bonds to reduce BBBY's debt and interest expenditure. The Exchange Tender deadline is 11/15/22.

As previously announced with the Company's Strategic Update Call/Presentation on 8/31/22, the Company is maintaining the following outlook parameters for fiscal 2022:

• Comparable sales decline in the 20% range driven by improvements in the second half of fiscal 2022 versus the first half of fiscal 2022

• Adjusted SG&A expenses ~ $250M below last year, reflecting cost optimization actions occurring in the second half of fiscal 2022

• Capital Expenditures of ~ $250M vs. the ~ $400M previously planned for fiscal 2022

--> The Company anticipates breakeven operating cash flow by the end of fiscal 2022 <--

RECENT EVENTS

• Another share offering of up to $150M was recently authorized. BBBY intends to use the proceeds from this offering to "drive immediate strategic priorities such as rebalancing our assortment and inventory, and addressing our debt."

• CEO Sue Gove hosted a vendor summit during which she remarked: "our accounts payable has been cleaner than its ever been," and said "we don’t think there is bankruptcy on our horizon.”

• CFO Gustavo Arnal passed away 9/2/22 from apparent suicide. He sold a ~50k portion of his >250k shares on 8/16 & 8/17 (this was pre-planned in April).

• BBBY was put on the Reg SHO Threshold List from 8/16 to 8/31/22 during which BBBY caught a lot of social/mainstream media attention.

• Ryan Cohen bought shares Jan 2022 through March amounting for 9-11% of outstanding shares. He sold the entire stake on 8/16 and 8/17/22 for unclear reasons. Many suggestions in his letter to the board were met/evaluated.

• CEO Mark Tritton resigned; Sue Gove served as interim CEO and later was voted in formally. Before that, new board members were voted in during 7/15/22 Annual Shareholder meeting (3 of 10 seated by RC Ventures).

June 5, 2020 -

Discuss here as to not spam the entire sub with this ticker. Ty Have fun.

January 3, 2020 -

Welcome back to the fucking casino!

Congratulations to all the traders who were short.

The form 144 should have been a clear indication of what was coming next.

You saw the situation change and you changed accordingly in order to make money. Well done.

---

Apologies to the apes who got slaughtered by Cohen selling.

That fucking sucks.

You'll be okay though, you were able to get yourself to this point before, you'll be able to rebuild and come back stronger.

---

WSB is a subreddit for traders, if you want to win, be smarter, be first, or cheat.

[SEC note: Don't cheat]

Being able to change your opinion and position when new facts come to light is key for long term profitability.

Good luck today and godspeed.

October 19, 2021 -

Regards fellow Regards.

I wanted to do a quick update on BBBY as there are some interesting developments and further landmines for shorties.

Looking at what happened to BBBY last week, we saw a big gap up from 8.16 to around 13 and close of 11.31 Monday. What caused such a big move like that was this:

Above was the options chain as it was Thursday the 4th. On the 5th, as we closed above 8, all of the highlighted calls expired ITM. Approximately 37,118 just going off the open interest in the snap shot I had back then which = 3,711,800 shares.

As BBBY already had a ton of open interest leading into these recent movements, you will see on virtually all option chains there is a ramp being built. As BBBY moves higher, it becomes a self fulfilling prophecy of expiring contracts ITM and further propulsion higher.

Here is the options chain of ITM contracts for Friday (we closed under 13 and remained that way through 5:30 PM which is the last moment you can exercise).

Here is fridays contracts all ITM

This represents 62,849 contracts ITM and this equates to 6,284,900 shares. This is roughly just under double what happened on last Friday the 5th.

Below is Aug 19, this coming Friday and this is already all ITM:

This represents 51,618 contracts ITM right now that dont even expire until this Friday and I imagine even more will be added in further out strikes over the week. This represents 5,161,800 shares.

Open interest is stacking elsewhere too, more particularly on the Sept 16 and further on the Jan 2023. Here are the highlights for whats in store:

Theres even a cute buildup of open interest on Jan 2024!

I decided to do the math and if there is any part of all this thesis on BBBY that is a nail in the coffin it's this.

Jan 2023 ALONE has 305,170 open interest running from 8 to 80. So if BBBY ever gets to 80, exactly 30,517,000

Keep in mind the stock only has 79,960,000 outstanding shares and a float of 69,450,000. 55,767,626 of which are owned by the top holders of BBBY and 29,000,000 shares are short. So right now between shorted shares and actual holdings not even by any retail at all, 84,767,626 shares are tied up. Throw another 30,517,000 shares in the mix by Jan of 2023 and who knows what the price action will do. Could go down, could go up, who knows!

If you haven't noticed, all stocks are doing well right now. It is important that the maco economic green light is on so to speak. This makes BBBY the value in BBBY shine even more. BBBY has 7B in trailing 12 months revenue. The ONLY thing "holding it back" according to all our favorite analysts is debt. Let something come up about a debt refinance, far OTM warrants offering or restructuring of the bonds break loose and we go even higher because then the analysts won't have anything left to complain about.

Long term it matters if the management company cares about the company and fixing its fundamental problems. Once net income is fixed, BBBY doing 7B in revenues. Buy Buy Baby doing 1.3B. This revenue will only grow especially under this leadership team that actually cares about the company. This in and of itself can command the previous prices in 2013 and 14 of 80/share before Tritton ever got involved.

Worried about some tomfoolery coming in to basically cheat like they did last time? The odds of that are very low now.

Robinhood is in some hotwater and it serves as a warning to other brokerages who did do the same thing to try it again. It acts as a classical skull on a pole type of message.

There were some interesting things that happened with GME and its price swings. This sums it up:

Every day, high frequency trading firms like Citadel siphon away investors’ money using their super-sophisticated, blink-of-an-eye trading systems to anticipate upcoming market moves and pick off investors’ orders at favorable prices.  They then turn around and immediately resell those shares at the improved price, pocketing billions of dollars in sure-fire profits.  Called ‘latency arbitrage,’ the practice moves money from the pockets of everyday investors to the coffers of the sophisticated professional traders who get to take full advantage of their ‘sneak peak’ into the market.

https://bettermarkets.org/newsroom/todays-court-win-for-the-sec-is-a-big-win-for-investors/

Citadel lost this case July 29th or at least that is when these were reported. Notice anything interesting since Aug? Some stocks have just been on a tear! Coincidence? I leave that up to you. What we do know is a certain someone can't cheat openly anymore.

The most recent whale wisdom is looking good. We even have a fair bit of healthy disagreement going on with one group buying a TON of puts and another fund happy to take the opposite with a TON of calls:

https://whalewisdom.com/stock/bbby

I mentioned earlier that the macro environment matters and it does. Its important to note that its basically party on until mid Sept. Next fed meeting is Sept 21st:

Next inflation data Sept 13th:

So there virtually nothing to come in and pull the rug from the broader market macroeconomically. This means that money is coming into the markets because the coast is clear for now and we have seen that happen on just the broader indices. We don't even have BBBY earnings until an estimated 09/29! So there is literally a full month of no random inflation report or JPOW stepping in and destroying the direction of this recent rally.

Heres something to laugh about:

Lastly we still have the update coming this month! What could it be? It could be the start of no return.

TLDR;

37,118 contracts expired 8/5 propelling us higher on 8/8. lil under double that has expired ITM on 8/12 for 62,849 contracts having expired ITM on Friday. Jan 2023 has 305,170 contracts ITM if it gets to $80 by then. Robinhood has more eyes on its practices than ever and so will other brokerages if they try to pull a fast one and speaking of fast ones, citadel and other traders like them don't have high frequency trading like they used to.

Buckle up buttercup. Gonna be a bumpy ride

February 2, 2020 -

WELCOME TO THE FUCKIN CASINO R/ALL

November 26, 2022 -

Hello,

How would I describe the situation of $BBBY stock and what has happened to it to someone who is trying to learn more about it?

Looking for a fast summary basically but still hitting all the critical points of this story that is unfolding before our eyes.

Any help would be appreciated.

November 7, 2023 -

Hey guys!

As the title says, I bought shares in bbby before they were deemed worthless and removed from my account. I'd like to believe this isnt the end of my investment here, but I have to accept that may be the case. The only thing that makes me believe it may not be over is the 652.5hrs in the docs that were logged in relation to M&A. What do you guys make of this?

March 17, 2022 -

Disclosure: I hold a modest long position in this ticker, currently underwater by about 25%, no biggie.

I opened my BBBY position in March 2022 when Ryan Cohen (he of Chewy and GameStop fame) bought his 9.5M BBBY shares for a ~10% stake in the company and then engaged in a very aggressive social media campaign against the company's executives and its "over price consultants". Ultimately, Cohen was able to secure 3 Board seats on the company for his hand-picked associates, and now has quite a bit of sway regarding the company's future:

• https://www.cnbc.com/2022/03/25/bed-bath-beyond-strikes-deal-with-activist-investor-ryan-cohen.html

BBBY is now trading at about a 0.11x price-to-sales ratio, and Ryan Cohen has announced that he thinks the profitable BuybuyBaby chain should be sold off (for several times more than the company's current market cap) in order to erase BBBY's debt and narrow the parent company's scope. This idea has some merit to it, and has been discussed before:

• https://www.cnbc.com/2020/06/26/buybuy-baby-may-be-worth-more-than-all-of-bed-bath-beyond-bank-of-america-says.html

• https://www.marketwatch.com/story/bed-bath-beyonds-baby-business-isnt-worth-multiple-billions-analysts-say-contradicting-ryan-cohen-letter-11646676679

Currently, BBBY is trading at around $8, with a paltry $650M market cap, against annual revenues of approx. $8bn in 2021. It historically has traded as high as $80 (2013-2015) and even $44 in 2021 (June 2, 2021). BBBY has also bought back $1bn worth of its shares in recent years, and clearly considers its own share price to be very undervalued:

• https://bedbathandbeyond.gcs-web.com/news-releases/news-release-details/bed-bath-beyond-inc-advances-1-billion-three-year-share

In addition to buying 9.5M shares between $13-17 (~$150,000,000), Cohen also purchased a ton of Jan 2023 Calls (16,701 contracts) with $60-$80 strike prices:

• https://www.thestreet.com/memestocks/other-memes/bbby-stock-ryan-cohen-steps-in-short-sellers-scramble

Ryan Cohen has been very vocal on his Twitter account since the New Year regarding inflation, monetary policy, and the Fed. He clearly has more than a passing knowledge of, and interest in, the current state of the economy. Of course, no mention of BBBY and Ryan Cohen would be complete without mentioning the short interest in the ticker (20M shares publicly reported short, or 25% of total shares outstanding. But somehow 84% of the float according to Yahoo Finance??!) and the stock's weird trading correlation with other so-called "meme stocks" like GME, AMC. For example, BBBY had a huge price and volume spike on June 2, 2021, the same day that GME and other meme stocks also experienced massive price spikes and trading. However, I will leave aside speculation as to what that correlation might be caused by, or what it imply for the future of the share price.

I keep struggling to think of any reason why a successful activist investor like Ryan Cohen would drop that kind of dough without a very serious plan to turn the company around, even in this difficult economic climate.

Is anyone else fascinated with this stock's future and curious to see how it all shakes out? Will Ryan Cohen's 17,000 Jan 2023 options contracts "print", or will his bet end up on WSB's loss porn hall of fame?

I am very curious to hear other people's take on this stock!

August 26, 2021 -

Hi everyone, bob here.

Well, it seems someone needed to buy a lot of BBBY on Friday. Just how much buying you ask? Well, i'm not sure how much BBBuYing there was exactly, but I can tell you there was nearly the entire float traded in a single day.

8/5/2022 trading data for BBBY

Holy shit! That means, there was 85.73% of the ENTIRE FLOAT traded on the lit market while the price went up and up and up.

That much traded can lead to a T+2 price improvement due to settlement for market makers to locate shares they sold naked (to buy orders) to provide liquidity to our free and funtastic markets...

Aside from pure volume and settlement mechanics getting me jacked for BBBuYing more next week (and the green that comes with it), I would like to share with you some really cool data modeling and information we can extract from the options chain.

Source document: https://docs.google.com/spreadsheets/d/1tu2BMk3yHGPQSoRwTINyo42LRqVCYn6StJ2LoafFNc8/edit#gid=43471938

There's a few dataviews and charts I set up in there you can check out, but I am particularly interested in the one depicting Total Weighted Delta by Strike. Here it is

BBBY Total Option Chain Delta Weights by Strike @ Spot Price.

Notice anything? Yeah, we have a HUUUUGE amount of interest at the $10 strike. nearly all strikes are positive delta weights, and the ones with negative delta weights are low values.

And here's the updated data going into tomorrow morning premarket

8/8/2022 chain OI/Delta weights

I'm jacked. The closer we get to $10, the stronger effect on hedging and the more upward pressure those calls will put on the chain as their delta value increases.

My apologies, I can get a bit nerdy sometimes

Ok lets step back to how I got this graph.

Delta Weight = Option delta value * open interest in options where calls carry a positive delta value and puts carry a negative delta value.

Total Delta Weight = Calls Delta Weights - the absolute value of Puts Delta Weights

So that means, at the $9 strike, there is more weight (and pressure) from delta hedging on call side of the options chain than on the puts side, helping drive the price up. Conversely, at the $16 strike, there is more delta weight on the put side of the options chain than on the call side, helping drive the price down.

So now that we understand what that graph means, I am sure you all can agree when I say:

Oh also, before you go, I wanted to share some interesting data that may reminid you of a fallen DD writer, u/yelyah2.

Before we dive into the #s, here's what they mean, from the creator of the model directly (source)

___________________________________________________________________

Delta Neutral

The Delta Neutral price that creates a total market delta of 0 across all GME options (all expiration dates) for a given date. It can also be though of as the intersection of a supply/demand curve for hedged stocks. See the "Methodology and Assumptions" section for full detail on how I develop this indicator.

Notes below for general options on how the delta neutral interacts with the underlying price:

• There is a large influx of call option purchases, because:

  • The call prices get less expensive as the underlying price approaches the delta neutral

  • Stock prices usually rebound/revert back to the mean after large crashes, so the price often rebounds anyways.

• With the large influx of call volume, market makers have to start buying stocks to delta hedge, which turns the price back around and creates an upward trajectory.

  • Important note that hedgies often hedge with derivatives instead of buying stocks, so there isn't a 1-to-1 relationship between the delta and shares bought/sold by hedge funds.

• Historically, you can see that GME often bounces off the delta neutral prices during drops. The exception is the February drop. When the underlying goes below the delta neutral price, a lot of pressure builds up that results in a significant increase when that pressure is released.

  • Note this is the primary way that I trade my model. I made a scanner that looks for equities that fall below the delta neutral.

Gamma Neutral

The Gamma Neutral price that creates a total market gamma of 0 across all GME options (all expiration dates) for a given date. See the "Methodology and Assumptions" section for full detail on how I develop this indicator.

General notes below for observations on how this indicator behaves:

• It acts like support/resistance between the delta neutral and the underlying, and typically bounces around between the two prices for most symbols (like we have seen with GME since April).

• It also goes crazy in periods of high volatility, as you can see by the very higher spikes.

• A gamma spike indicates the presence of POTENTAILLY slippery option market conditions, which COULD lead to a gamma squeeze. There were certainly spikes present back in January, but we had a few one-day false starts this last month.

• They are often triggered by high price movement in a day, which can lead to continue high growth if underlying volume supports it.

• Gamma spikes can also be triggered by unusual options purchases during the day. These are the one ones to find, because you can often catch the high increase waves before they actually start.

• If I'm trading this indicator, I often either wait for a gamma spike to continue for 2 days in a row and supported by increased volume. Otherwise, I invest straight away if I find a gamma spike just based on options movement (i.e. no significant underlying increase yet).

Methodology and Assumptions

I write my own algorithms to produce the results above. The following lists some key methodology and assumptions I use:

• I rely on daily options summaries produced by https://www.orats.com/

• Their options summaries use "near end of day" snapshots (i.e. 15 minutes before close), because they say its more reliable for producing Greeks. They say the last 15 minutes is not a reliable source for options prices to represent the rest of the market day. Therefore, you may notice

• I still rely on www.historicaloptiondata.com for my stock information, but working on converting to orats.

  • Note that the Underlying Price in the graphs above is the Close price, not the near end of day price.

• For the Implied Volatility (IV), I use the following method:

  • Orats produces a smoothed IV that I like, which I use in conjunction with the mid-price call/put IV's to produce a final IV.

    • The orats smoothed IV cleans the quotes, and solves for a residual yield based on the put-call parity formula. This lines up the call and put implied volatilities, to account for estimating hard-to-borrow stocks, or stocks with differing dividend assumptions.

    • Next, the IV curve is smoothed through the strike IV's using cubic splines. This is helpful for producing reasonable IV's in low volume stocks or strike prices.

  • The smoothed IV methodology above produces the same set of IV for both calls and puts. Theoretically, the IV should be the same for both calls/put, because it should represent the estimated volatility of the underlying price for both calls and puts, which wouldn't differ.

  • However practically, the IV never actually just represents the estimated volatility of the underlying. The IV used in the Black-Scholes (B-S) price calculation is usually always higher than the historical volatility, because options sellers attach an IV premium to the raw IV that helps make them money.

  • Because calls can produce infinite losses to options sellers, the IV premium tends to be higher for calls than for puts. I use the following methodology to adjust the orats call/put smoothed IV:

    • I pull the orats options database for each ticker, trade date and expiration date.

    • Calculate the relativities of the raw mid-price call / smoothed IV, and the raw mid-price put / smoothed IV for each strike price.

    • Fill in any missing relativities with the nearest relativity, within its own ticker/trade date/expiration date. This mostly just applies to far OTM strikes.

    • Smooth the relativities using rloess, which is a local regression using weighted linear least squares and a 2nd degree polynomial model. This method assigns zero weight to data outside six mean absolute deviations.

    • Apply the smoothed call/put mid-price relativities to the smoothed orats IV estimates to get the final call/put IV estimates.

• Using the final call/put IV estimates described above, I calculate my own Greeks. I like this source if you're interested in the formulas: https://www.macroption.com/option-greeks-excel

• For the total market delta and total market gamma, I rely on the OI x delta and OI x gamma for each strike price.

  • Note that the delta of a call is usually equal to (1 - put delta), so not adjustment is needed to the delta signs when calculating the total market delta.

  • However, the call/put gammas are both positive based on the B-S calculation. If you're calculating the total gamma for a portfolio, or the total market, you have to add the call gamma and subtract the put gamma.

• To estimate the delta neutral and the gamma neutral, I have an algorithm that relies on the optimization toolbox in Matlab to identify an underlying price that achieve a total market delta and a total market gamma.

• For the sensitivity tests, I adjust the underlying price in the snapshot by +/-5%, and run the algorithms as described above, to estimate what the total market delta/gamma would be at the different underlying price.

• Note that the IV would change with higher/lower prices for the delta/gamma neutral and the sensitivity tests, but the impact is not significant enough to make a meaningful difference and takes significant processing time to apply the IV curves. However, it is an important simplifying assumption to be aware of.

• Open Interest (OI) is always lagged one day for options summaries. The OCC releases final open interest on a given day, and it represents the OI for the close of the prior day. Therefore, the OI I get in my summaries on 6/28 does not represent the OI as of close on 6/28. It represents the OI as of close on 6/25. If you see a source like Yahoo give live OI throughout the day, they are only estimates, and their algorithm methodology for estimating the OI based on various price/volume movement is a closely guarded secret.

  • Note that I'm currently working on my own algorithm to estimate same-day OI, but I'm not done yet.

  • However, it should be noted that using the prior day OI is a limitation of the data available to me.

___________________________________________________________________

Got It? Good. Now On To The Show!

She has shared her Delta Neutral Model with me, and I thought I'd add the most recent data here in case its useful, along with a quick explanation of what it means for BBBY on Monday and early next week:

• Spot Price: 8.16

• Delta Neutral: 5.74

• Gamma Maximum: 8.40

So applying the above knowledge of the model, and remembering the values will update tomorrow morning with the new chain data, we can deduce that:

• We are trading well above delta neutral, and we should expect a floor of support there, and I bet it rises right along with Gamma Maximum tomorrow. In fact, I have already picked up the data and analyzed it. With both GM and DN rising, we should see continued upside potential and there will be heavy hedging action required the closer we get to that giant stack of open interest at $10. As those options become at the money or near the money, it will generate a gamma spike, which usually can indicate a massive move is imminent.

TLDR:
There is a lot of data in the options chain pointing to a big move, likely to the upside for BBBY in the near future. I truly believe this to be at minimum a 10 bagger play. There was also a fantastic post by another user on WSB i shared here that goes into detail on several aspects that make BBBY a truly great investment, with real squeeze potential that could rival GME during Jan of 01...

here's the link to that post: https://www.reddit.com/r/FWFBThinkTank/comments/wgmoma/bbby_and_the_middle_game/?utm_source=share&utm_medium=web2x&context=3

None of this is financial advice. I'm certainly not qualified for that shit...

May 7, 2022 -

Can someone tell me when the last possibility for any return in this play is gone? Would like to end this chapter but the hopium keeps me coming back 😂 So is there a date where this is definitely lost or will people just keep moving the goal post? I heard something about december 14th is that correct?

April 18, 2022 -

Hey everyone, it's me again, the Bond Baron. Last time I posted, I talked a bit about the BBBY corporate debt situation, which at $1.2B long term debt outstanding, is worthy of concern. Many people who are hating on BBBY don't understand the nature of this debt, so let me give a brief intro and break it down a bit more clearly.

Introduction

In addition to the increased ABL facility expiring 2026 and the $500m FILO loan that was just announced, BBBY has $1.195B in unsecured debt outstanding. This debt is split across three maturities (expiration dates):

• $295M due August 1st, 2024. Annual coupon payments are 3.749 cents for every dollar

• $225M due August 1st, 2034. Annual coupon payments are 4.915 cents for every dollar

• $675M due August 1st, 2044. Annual coupon payments are 5.165 cents for every dollar

As you can clearly see, only $295M of the total $1195M debt outstanding is due this decade. If you look the coupon payments, they are also relatively low. Popcorn stock had over $10B in total debt outstanding, with a considerable portion having coupon payments of over 10 cents! That's over 10% of the issued debt paid by the Popcorn stock each year!

Given the relatively low coupon payments, I'm not particularly worried about debt servicing being a huge cost in the long term. BBBY has some time until 2026 is near to show the world how well they can execute. Near term execution will have a far greater impact on the company's future.

The 2024 Bonds pertain most to BBBY's near term financial situation

1 year chart of the BBBY 2024 Bonds. Prices in cents. As recent as March, these bonds traded at 100 cents on the dollar. Now they can be bought back for way cheaper.

What BBBY needs to worry about is the 2024 bonds. They mature in less than two years, and if BBBY doesn't pay them off soon enough, they risk default. That would be very bad for the company. And right now the company believes that's a very high possibility. Look at these prices:

Under "LAST" you can see how many cents on the dollar these bonds most recently traded for. The 2024s most recently traded for 42.15 cents on the dollar as of this writing.

As you can see in the bottom row, that $295M of debt issued back in 2014 that's due to expire in two years is now only worth $124M as of last trade. That's a significant discount! And that's the point many people are missing. Given the volatility of BBBY shares, if BBBY sells a modest percentage of their shares outstanding, say 10-15%, it's quite possible for them to pay off the entirety of the 2024 debt. This is a big deal. There would be much less default risk over the next decade should this course of action be taken. It doesn't solve BBBY's operational issues, but it would solve BBBY's financial woes.

"But it would dilute the float." Right. But they only need to sell $124M worth of shares. BUT it knocks out $295M worth of debt off the balance sheet. Shareholders would experience an improvement in the company's value by $171M. Over 2x return on the money. If someone offered you an immediate 2x return on your money, you'd take it, right? Looking at the current market cap, that's a huge chunk. If BBBY squeezes again, and the company sells shares, a buyback of this cheap debt still a huge win despite dilution. The company reduces its Enterprise Value (EV = mkt cap - cash + debt), making it more attractive buy.

Recovery Analysis

The situation at BBBY is still quite dire. Should management fail to execute, you need to consider what would happen in the case of the company default. That would happen if they continue to lose money, and max out their senior credit facilities, without paying off long term debt.

To calculate the Recovery percentage of these unsecured bonds, I listed the total Debt and Assets. For Debt, I included $600M for the ABL facility (I assumed an increase of $200M since last reporting), which was near the previous limit before it was recently raised to near $1.2B, and also $600M of Debtor in Possession/FILO financing, $300M of which would go into company assets and the rest burned off in operations. Any debt of lower seniority to the unsecured bonds was disregarded here (e.g. gift card balances) for obvious reasons.

For assets, I took the company assets, depreciated the Property and Equipment uniformly, and estimated the recovery value for each one. These data come from the most recent 10-K and 10-Q filings which you can find on SEC's EDGAR search tool.

I then took the 2021 revenue of buybuyBABY, and divided that by the 2021 revenue of BBBY to estimate the value of the buybuyBABY assets relative to the whole.

Finally, I took the company assets, subtracted the senior debt from it, and was left with a remainder of $553M to divide among the unsecured credit of nearly ~$2B, i.e. bonds and accounts payable. That gets you a recovery percentage of 27%. That is about 35% less than where the 2024 bonds are trading right now, which is 42.15 cents on the dollar. However, this analysis assumed an inventory recovery of 35% which is very conservative. This is liquidation value.

Many of you would scoff at me for valuing buybuyBABY at $218M. And I'd agree with you 100%. I'd say even in a dire situation, it could quite easily fetch a valuation of $600M given its market positioning and recent growth. I redid the recovery calculation, valuing BABY at $600M and got a recovery percentage of 46.87%, which is a small premium to the current price of the 2024 bonds. Any equity offering done by BBBY will increase this percentage considerably, and could even increase it to 100% if the 2024 bonds are paid off.

This recovery analysis assumes a quite bearish case; it's definitely not a bull case. The bull case is that BBBY survives intact without bankruptcy and the bonds are paid off completely, which is a 3x return within 2 years. And of course, this is much more likely with the 2024 bonds and is somewhat reflected their price relative to the 2034s and 2044s.

Business Risks

In my post I talked about the balance sheet of BBBY but didn't talk much about the cash flows. It's true that if BBBY continues to burn cash at its prior rate, the ABL facility will quickly max out and the financial conditions would worsen. That would be catastrophic, as the ABL has a higher claim on the company assets and you could potentially end up with nothing as a bond holder.

However I don't see this as a given like many in the financial sector are saying. In the recent meeting, we saw that BBBY cut its CapEx by $150m and its SG&A by $250m. That SG&A expense from last quarter was huge (over $600m) but in my view it was likely a one time thing due to poor inventory mix. This holiday season, BBBY really needs to get its mojo back with a stronger inventory mix to hit sales targets and alleviate investor concerns. The future cashflows of BBBY are highly uncertain, but as what we heard on last week's call, management is quite aware of it as they shift their strategic plans from transformation to survival.

Other Remarks

There are a few more things we can look at.

Credit Rating. In the image below, you can see the CAA3/CCC- after the bond CUSIP. That's the corporate bond rating, which is assigned by Moody's and S&P. I'm not a corporate bond rating expert but anything triple C is pretty bad. If BBBY can knock out the 2024 debt, and show modest company performance improvements, we could see that rating to up to a better level. That would improve the company's financial position.

Borrow Statistics. Now I don't know who would short these bonds. Maybe a huge fund that has plenty of money to burn. The short utilization on the 2024 bonds as of a couple weeks back was as high as 20%. Now it's about 2.9%. This data comes from lenders but I don't know if it's complete. If we look at the borrow rate, it's 15.58% with $6.9M available to borrow. Again, some dummy will get his lunch eaten if BBBY decides to sell stock and buy back these bad boys. I'm not predicting a short squeeze on these bonds and I generally don't these metrics to determine what to invest in, but it would be funny if someone got blown out.

1 yr chart of the Bid/Ask price of 2034 (left) and 2044 (right) BBBY bonds, in cents.

Other Maturities. I've been talking about the 2024 Bonds mostly because they are the most interesting in my opinion. But if you are bullish on the financial recovery of BBBY, these seem to be more asymmetric bets, as it wouldn't be hard to imagine them recovering to where they were near the beginning of the year if the financial situation at BBBY dramatically improves.

Conclusion

Anyone who has a stake in BBBY should acknowledge the financial state of the company. And to do so, you have to look at the bonds, especially the 2024 maturities, and the possibilities that might occur given the very volatile situation. BBBY buying back its 2024 bonds with cash received from a future share sale (at high prices, hopefully) would be highly accretive to the company's fundamental value. As for an investment, this post is not investment advice. These are distressed bonds, which do not trade on an exchange. Because of this, they aren't very liquid. In the Recovery Analysis, you can see these bonds are currently trading at a very low estimate of BBBY's liquidation value. The bond market clearly doesn't think BBBY can come back, and a buyback of 2024 debt financed by a share offering is not fully priced-in.

Hope y'all enjoyed the update. If there's anything I can improve or discuss in more detail in a future post, please let me know in the comments below. Cheers everybody!

August 28, 2021 -

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BBBY Investor Relations

Please see the community forum for recent updates to the sub rules.

RECENT COMPANY EVENTS

• CFO Gustavo Arnal passed away 9/2/22. He sold a ~50k portion of his >250k shares on 8/16 & 8/17 (this was pre-planned in April).

• Company held a pre-market Strategic Update Call/Presentation on 8/31/22:

- $375M FILO loan. ABL facility increased to $1.13B.

- 12M shares to be sold some time in the future using Jeffries as facilitator.

- Lowering CapEx: layoffs to 20% of executive positions, closing 150 stores, pausing remodeling and new store opening which will lower yearly expenditures by "at least $100M."

- Retain buybuyBABY for the foreseeable future and accelerate growth.

- 'Brand Presidents' Patty Wu (buybuyBABY) and Mara Sirhal (Bed Bath & Beyond) announced.

- Company acknowledged the high volatility of the stock price and wrote a disclaimer regarding trading the stock during a short squeeze (S-8, S-9).

• BBBY was put on the Reg SHO Threshold List from 8/16 to 8/31/22.

• Ryan Cohen bought shares Jan 2022 through March amounting for 9-11% of outstanding shares. He sold the entire stake on 8/16 and 8/17/22 for unclear reasons. Many suggestions in his letter to the board were met/evaluated.

• Board members have been buying some shares in the $4.80 range; see Form 4 filings.

• CEO Mark Tritton resigned; new interim CEO Sue Gove. New board members voted in during 7/15/22 Annual Shareholder meeting (3 of 10 seated by RC Ventures).