Bed Bath & Beyond bankruptcy fuels near-record short selling: Stocktwits

By James Rogers

Bed Bath & Beyond's stock plunged Monday following the bankruptcy filing by the troubled home-goods retailer

The specter of bankruptcy had loomed over Bed Bath & Beyond Inc. for months before the home-goods retailer filed for Chapter 11 on Sunday.

Bed Bath & Beyond's (BBBY) stock fell 37.1% Monday on volume of 376.82 million shares, well above the stock's 65-day average of 105.6 million.

Stocktwits, a social platform for investors and traders, told MarketWatch that roughly 81 million Bed Bath & Beyond shares are sold short Monday, sitting near the highest level in the stock's history.

Just as Bed Bath & Beyond is paring down its assets and settling its positions, so are market participants, said Tom Bruni, lead writer of the Daily Rip & Markets, Stocktwits' newsletter. "Longer-term holders are figuring out what to do with their remaining shares (or profitable short positions), and traders continue to take advantage of the volatility in the market," he told MarketWatch.

Also read: Bed Bath & Beyond: from home-goods behemoth to bankruptcy

"With that said, today's average trading volume makes it a lot easier to cover those shorts than in the past," Bruni added. "Average trading volumes have been in the tens of millions all year and into the hundreds of millions since March 30, 2023."

Bed Bath & Beyond and "certain of its subsidiaries" are now operating their business and managing their properties as "debtors in possession" under the jurisdiction of the bankruptcy court, according to a filing with the Securities and Exchange Commission Sunday. Debtor-in-possession, or DIP, financing lets companies keep operating in Chapter 11 bankruptcy.

In a statement released Sunday, Bed Bath & Beyond said it intends to use the Chapter 11 proceedings "to conduct a limited sale and marketing process for some or all of its assets." Bed Bath & Beyond also expects to receive a Nasdaq COMP, -0.61% delisting notice, according to its SEC filing.

Now read: Bed Bath & Beyond bankruptcy: Here's what happens next

Set against this backdrop, Stocktwits is seeing Bed Bath & Beyond-related message volume marginally lower than one week ago and one, three, six and 12 months ago. Additionally, the stream-participation ratio is about average for the stock, at around two messages per user.

"I think overall this represents a lot of apathy on behalf of retail investors," Bruni told MarketWatch about the sometime meme stock. "Bed Bath & Beyond has been in the news for three years now, and people are just getting tired of it."

Bruni explained that Stocktwits generally sees an uptick in message activity and sentiment if prices rally, but it lasts only as long as the price rally does. "Traders/investors are finding more interesting topics elsewhere," he added.

Sentiment is clearly weighed down by the fact that the company is liquidating its assets, according to Bruni, who notes that Bed Bath & Beyond had been trying to restructure and stay in business. "But it's not been able to do that, so it becomes a math equation for common shareholders," he said. "How much, if anything, will be left for them after all the company's other creditors have been paid?"

-James Rogers

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04-25-23 0805ET

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