- The Money Minute
- Bed Bath & Bankrupt
Bed Bath & Bankrupt
First thing’s first: WE DID IT! We won a Webby! We got the People’s Choice Award for the best Advice & How To podcast. For all of you who voted — thank you. It really and truly does mean the world to me. I literally could not have done this without you, so this is for us.
Now, let’s get into the big news on Wall Street.
The time has come to ask: Reddit meme stock boys, who hurt you? Who made you think that it was a good move to keep buying the stock of a dying company like Bed Bath and Beyond? Are you okay? Do you need Money Rehab? We all know the answer to that question…
But okay, look, sometimes Reddit is right. And there are thoughtful people on Reddit. But sometimes it falls into an echo-chamber-confirmation-bias situationship. In case you happened to have totally repressed 2021, here’s a refresher: there’s a long-standing subreddit called r/wallstreetbets. At the time, it was mostly dudes who made dirty jokes and questionable options plays. But occasionally, they would identify a profitable company and people would make serious money as a result. That was the exception and usually, those so-called bets were exactly that: bets— and losing ones. In 2020 and 2021 the market was in what can only be called “easy mode” and during this time, lots of new investors and traders were playing around in the market for the first time.
It’s a longer story than this but during this time, wallstreetbets latched on to the GameStop stock (yes, GameStop, the mall store that sells used video games to 12-year-olds). Anyway, Reddit folks were hot for this stock, and market conditions were, to put it bluntly, very weird. As a result, a short squeeze popped off and stock stayed high. So, a fair number of people made money. When this was all going down, I actually talked to one of these people on my podcast Money Rehab who had just made a million dollars on GameStop. This gold-rush triggered the meme stock craze and it was a whole thing… until it sort of fell apart when brokerages started playing defense.
But the mentality of there being “free money” around and a chance for the little investor to make it big has persisted on Reddit. Some companies have leaned all the way into this. For example, AMC, the movie theater company, became popular during the meme stock craze. Some people involved in the meme stock craze would refer to themselves as “Apes.” So AMC began selling financial assets with the ticker “APE” to raise money by marketing to the meme stock crowd. There’s an ongoing lawsuit about these assets in particular, so how well this works out for everyone remains to be seen…
But AMC wasn’t the only company that got caught up in the stonks' energy. Bed Bath & Beyond also featured heavily in the 2020-2021 stock market chaos. Bed Bath & Beyond used to be known for their abundantly stocked stores and their regular coupons in the mail. Over the years, the coupons have been harder to come by, and the shelves increasingly bare. Plus, one of their recent CEOs tried to make a Bed Bath & Beyond branded line of products happen. And nobody wanted any of that. The company has been circling the drain for a while and by December 2022, they were ready to declare bankruptcy. But they had one weird trick up their sleeve. Because remember: they’re one of the OG meme stocks and they have a recognizable brand. Even if people weren’t actually shopping there… they were familiar with the store.
So, Bed Bath & Beyond struck a deal with a company called Hudson Bay Capital. The deal is incredibly complex but the simplest way of explaining it is that Hudson Bay bought the rights to sell $1 billion in Bed Bath & Beyond shares, plus financial assets that could be turned into shares. But the deal hinged on the stock price staying about $0.72 a share or above. Which yes— you heard that right, is less than a dollar, so, penny stock territory. Retail investors bought the stock and it almost worked. But, remember: this is a company that is failing. It has no turnaround plan. They are closing stores. Which leads me to the fundamental question - Why buy?
If you go into threads or watch videos about this, the pervasive narrative was that someone is going to come along and save Bed Bath & Beyond. Or that there’s going to be a short squeeze. Or that you should buy the dip and dollar cost average down to … zero, I guess?
The whole thing has been wild. But, spoiler alert: it’s over now. And Bed Bath & Beyond is officially declaring bankruptcy. So call your mom and tell her to use her coupons if she’s got ‘em… assuming she can find anything left in the store to buy. Although there are sure to be lawsuits The bankruptcy filing means that shareholders will get absolutely nothing.
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