Bed Bath & Beyond (NASDAQ:BBBY) stock rallied over 20% overnight on a short squeeze. But a bankruptcy filing may be imminent, as on its bonds.
Fintel reports that , and over half the positions off the exchange were also short. With general market speculation rising, the stock was ripe for a short squeeze. Shorts borrow shares but must repurchase them to exit the trade.
BBBY Stock: Squeezed Out
Bed Bath & Beyond owed $28 million of interest on bonds worth . It previously defaulted on $550 million in loans arranged by JPMorgan Chase (NYSE:JPM) and a $375 million facility from investment firm .
The retailer now has a 30-day grace period to come up with the cash. It has announced the closing of 87 more stores and the Harmon drug store chain, on top of 150 stores closed last year. Bed Bath & Beyond is trying to sell its Buy Buy Baby chain but finding few takers. The stores that remain are emptying of merchandise. All these moves, which are meant to conserve or raise cash, are typical in a company facing bankruptcy.
None of this is news to investors. Hope for the company has been fading all year as predictions of bankruptcy become common.
Even some traders
on Stocktwits of being in on the squeeze say they’re Some bears are condemning while others are predicting . Comments on $BBBY at Stocktwits on Feb. 2 were heavier than they have been for months.
What Happens Next?
The Fed’s perceived “dovishness” has brought out the animal passions in small traders, who are bidding up the price of other stocks previously left for dead, like Carvana (NASDAQ:CVNA) and Genius Group (NYSE:GNS).
But short squeezes end. It’s impossible to predict when that may happen, but when they do prices revert to fundamentals. The fundamental value of Bed Bath & Beyond may be zero.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
