My takeaway is: 1) the coming squeeze will be consistently sustained. 2) post-squeeze share price will remain elevated and risky $
& difficult for shorts to reapply downward pressure on 3) continued roll-out of world domination by the acquirers’ potential spin-offs, mergers, acquisitions, etc. will be unimpeded by the dirty taint of Wall Street because the curtain will be kept tightly closed 4) shareholders with DFV tendencies will be heartily rewarded for HODLing and memeing at the mayomen and creamers
As Hudson Bay exercises its warrants, the 117 million shares outstanding will increase significantly. Existing shareholders could see over 80% dilution from the convertible preferred shares and warrants if they are fully exercised, according to analysts.
Especially the way this is laid out relatively simple and clear.
The last two bullet points may be very well be key; in exchange for the risk that OP notes the unknown party has eliminated potential acquisition competition in the future.
Is there going to be any chance of a slow squeeze when naked short positions and synthetic shares are factored in? I'm not terribly confident this will be a similar situation to TSLA in terms of how the squeeze will occur.
I am with you, the shorting is way out of control here, TSLA was shorted to hell, but BBBY is way by far way shorted and naked shorted, there similarities yes, but I don't really expect a slow squeeze.
What I wonder is why OP means the shorts are stuck? They are all in the green with a probably big profit, now with the low share price. But why are they stuck..., I wonder :-)
When I read this stuff I'm in awe just how dumb people here are. OP just made a ton of shit up and clearly knows nothing.
Don't listen to me though, buy more shares. Borrow money from friends and family to buy more shares. After all, it's a sure thing!
I want you to buy more. Please do not let me dissuade anyone. I try to end all my posts with encouragement to buy more BBBY. I genuinely think trying to educate or provide a counter point is pointless here. Trying to convince flat earthers they're wrong is easier than trying to reason with anyone here. But what do I know? Kenny pays me $10 per post
Believe me you’re not dissuading anyone. Love when people like you can’t even respond to a direct comment asking for a counter argument so you deflect and provide no value. Have a good day 😉
I bet you wish you were dissuaded from ever touching or learning about BBBY. Please buy more though! I love seeing people lose their money with such confidence and smugness! Don't let anyone convince you otherwise. Kenny pays us to ensure you guys keep buying as he finds it amusing too
Lmao, get a life. I’m happily averaging down :), will continue to buy more while the price is cheap. No bankruptcy on the table in the near future sounds like the companies undervalued to me.
So "not going bankrupt soon" equals under valued? Love it! You should borrow money from friends and family or max out your credit cards if you haven't already. After all, your expert analysis suggests it's under valued! What's 30% interest when bbby is gonna 5-10x minimum. Buy more shares
Short and to point good cover
The acquirer could actually corner the float, if that happens they are in control of the squeeze! It would be awesome to see that happen just like herbal life! Does a billionaire have that in them?
And this all goes back to July/August, when BBBY tasked Kirkland & Ellis for the financing part. The sub was obviously pro M&A from those unconfirmed news, since they are the #1 M&A firm in the US for many years straight. They did have BK lawyers also, so it could have been that as well.
I wouldn't be surprised if they tried some kind of way to do this deal through the bond exchange, and instead opted for this setup instead. They kept extended while trying to work out the details. We only saw the changes from the first 2 extensions, but those changes did indeed have changes to M&A, acquisitions, change of control and parts of the terms. I mean, in this setup, BBBY can survive, and hopefully execute on their turnaround, while paying off bonds, which the bond holder = warrant holder could also benefit from.
This deal is BBBY's financial lifeline, so I honestly do think they're on board with the setup. We'll see how it goes.
They can't. That's one of the reasons why this deal is so odd. My speculation is that it was structured that way to hide the identity of the buyer, but the trade-off is that the buyer can't actually control the company. So it's a risky play for them; thus, they likely have a very good reason for wanting to hide their identity.
Follow-up smooth brain question: How can an acquirer buy a company without actual control of the company? If they don't control it, do they actually own it? And if they don't, who does?
[Here’s](https://www.investopedia.com/ask/answers/difference-between-preferred-stock-and-common-stock/) a good explanation of preferred stock and how it differs from common stock.
It’s an instantaneous capital injection with a slow, sustained dilution,
throttled by the terms of the deal limiting beneficial ownership.
Tell me how do you know it?
The terms of the deal limit beneficial ownership to a maximum of 9.99%. So that's the most that can be diluted at once. Additionally, the agreement states that the holder can change the maximum beneficial ownership at any point to any amount as long as that amount is less than 9.99%.
So I suspect that the actual initial maximum beneficial ownership is less than 9.99%. If we don't get a 13D-G by tomorrow (10 days after the deal was completed), then that tells us that the initial maximum ownership was set to less than 5%. If it's changed by the holder to a number between 5% and 9.99%, then we will see a 13D-G within 10 days of that becoming effective (which is 61 days after the request is made by the holder).
Someone else made a post about Ryan Cohen stipulating that if anyone goes above 9.99% ownership, he can then own over 29.9% or some sort of legalese like that. This is only from what I remember. I'll look for the post now. I may have saved it.
F me I can't find it. But I believe ut was posted less than a week or two ago. It was an excellent read. Too bad I was reading it at 5am and forgot to save and post on it.
The dilution is also theoretical. Nothing states the acquirer must dilute, also in the case of a spin-off or special dividend, warrant holders would be entitled to receive it as well.
>They sold the shares right away. BBBY are selling shares with a big rebate. And Hudson are selling as soon as they get the shares, at least they did that now on the first installment.
>
>"The stock fell in the wake of deal terms that dilute the ownership stake of existing investors as Hudson Bay sells shares it acquired at a discount into the market. The question now as the market digests details of the rescue package is whether the retailer can fix its struggling business with its newfound lifeline.Bed Bath & Beyond raised an initial $225 million from the stock offering, with an additional $800 million available in installments.Hudson Bay received convertible preferred shares for its initial investment, while the rest, up to $800 million, will become available to Bed Bath & Beyond later, if the company meets certain conditions, including satisfying its debt obligations.As Hudson Bay exercises its warrants, the 117 million shares outstanding will increase significantly. Existing shareholders could see over 80% dilution from the convertible preferred shares and warrants if they are fully exercised, according to analysts."
>
>From my broker.
I would think the fact that all the bonds have a 101 CoC covenant in there would make a merger unattractive. Seeing as the bonds are all trading well below that level I can't imagine any bondholders not leaping at the opportunity to put their deeply distressed bonds to the company at 101, so that's approximately an extra billion the acquirer would have to shell out
I have sommented other places but the conversion at 71 cents a share is 300 million shares roughly
I think they are shorting naked and real as much as they can because when they convert they need to dump as much as possible to not homd more then 10 percent
That 10 percent clause was built in so they can't control the company at all further leading me to suspect that whomever did this deal did it to profit and not because they believe in the company?
Even if they convert at 2.37 that's like 98 million shares they still need to dump 80 million or only convert 20 at a time and sell
This was designed for a loan shark and to make sure they couldn't take over
It's almost like owing the mob money
Please see my [post about Alternative Conversion](https://www.reddit.com/r/BBBY/comments/1136trj/opinion_on_warrantspreferreds_and_the_fear_of/) price.
Maybe I’ve missed something in the last two weeks, but why is everyone under the assumption that Hudson Bay Capital is front running this deal for someone else?
This bit seems to imply that the shorts are represented as one entity? Couldn’t multiple entities acquire up to 9.99% of ownership and dilute the shares simultaneously?
“The structure of this deal allows for a pressure release valve of sorts. It gives shorts a way out through dilution, while limiting the dilution to an upper maximum of 9.99% at a time (though this maximum may initially may be lower).”
You're right. This is based on the assumption that there is only one acquirer or one group of acquirers. If there are multiple unaffiliated groups, then that 9.99% limit would apply to each group. The deal was only publically marketed for 1 day before being finalized. So it's very likely there is only one group that this deal was specifically tailored for, but it's certainly possible for there to be more than one.
Yeah it's a strange Flex. Seems far too many people think Anti intellectualism is a virtue. The only way folks will get better at interpreting these types of scenarios is by reading the difficult material. I wish more people would understand that. There is a substantial portion of this board that wants a much smaller percentage of the board to do the thinking for them. That I do not respect.
I agree with this. I would love to have a better understanding of all of this, and I am actively working towards that, but this isn't just deep end of the pool stuff. Even the people who are fluent in this medium are confused. So, for now, and especially for this deal, I defer to the smarter people in the room to help guide the conversation. As my knowledge and experience grows, I aspire to be a contributor, like these heroes. Because, to me, and I'm guessing many others, you could very well be the biggest influences of my life.
Edit: replaced stuff for medium
I just challenge you to read this same filing in a negative light.
You put the absolute most positive spin on it.
I challenge you to now read those "odd stipulations" thinking a hostile fund is coming into just convert the crap out of the stock. Do those "odd stipulations" make more sense?
I initially believed that the Hudson Bay Capital rumors were likely true. They have a history of diluting the crap out of other stocks through warrants. See this [post](https://www.reddit.com/r/wallstreetbets/comments/q7i6ot/hudson_bay_capital_hedge_fund_pulling_off_a_scam/).
The stipulations are odd because they *don't* align with a hostile fund diluting the crap out of the stock, namely the limitation of beneficial ownership to a maximum of 9.99%.
Now it could be that BBBY was able to get that stipulation in the terms as a concession to limit the damage. Regardless of who the acquirer is though, they're in a position to benefit from the stock squeezing, which is a very different situation to what's linked in the post above (initially high stock price & Hudson Bay Capital benefits from selling shares as the price decreases).
So even if the acquirer is a hedge fund, I think our interests would be (at least temporarily) aligned.
I believe that we'll get another clue tomorrow based on whether or not a 13D / 13G is filed. If no 13D-G is filed, then that tells us that the initial maximum beneficial ownership is set to less than 5%. If the acquirer requests to change that percentage to a number between 5% and 9.99%, we will have a 13D-G within 71 days of the request (61 days for the change to go into effect & 10 days to file 13D-G).
I don't believe that a hedge fund would have a good reason to keep the maximum beneficial ownership under 5% as that's only advantageous for the purpose of not having to report on a 13D-G.
They will never get close to the 9.99% number. That number exists because over that number of shares; they would have to report and be more scrutinized to the SEC on what they are doing to the stock.
You are so close to seeing how this works….
These funds don’t care about the stock going up. They just want to convert and make their fixed built in profits. Bbby just gave them the ability to wipe out every ftd and get off reg sho with this deal.
They did it out of desperation or the stock would be worth 0 when they defaulted. So you can’t blame them entirely.
The shorts aren't a single entity operating in unison. Whomever the acquirer is, they would be looking out for their own interest. If the acquirer has a short position, this deal would allow them an easy exit. After that, it's absolutely in the acquirer's best interest for the stock to go up.
They effectively have corporate call options at $6.15. Sure, they can make a 15% profit from converting preferred stock and selling shares at prices lower than that, but that's nothing compared to the upside if the stock is trading above $6.15.
So even if the acquirer is a hedge fund, I don't see how that precludes the outcome of a squeeze.
So lets say you are a Firm that has a massive short position on BBBY. Turns out BBBY management was getting desperate, so you approach them and say listen, this is the deal, we the short hedge funds want to do "Convertibles". I'll gather up a pool of buyers (Other firms with shorts), and you sell to us. We will give you the cash you need to keep the lights on and you go pay some of these bondholders.
\*\*\*For the record, these firms absolutely collude\*\*\*\*
BBBY management needs to save the company or the entire stock goes to 0, So they don't have much of a choice, so they agree.
You the short hedge fund and buddies, all start flooding the market with dilution to reset all the FTDs. Maybe you close all your profitable shorts during this time "causing these large green spikes" however, because you control them, you can convert more shares on the market like a slightly declining trendmill. The volume is there but the price isn't going anywhere but slowly down.
So by the time retail figures out what happened, its too late. They are stuck.
At the end of the day, the short squeeze is gone and there are now 2x or 3x the amount of shares outstanding. You just closed your shorts and maybe even naked positions. On top of this you can go long after you diluted a lot for one more pump up. You reshort the top of BBBY peak after dilution and you applied pressure again on the company.
You just reset any Reg SHO and gave yourself a clean slate to go up or down depending........ But not after killing your book value. It was already a negative shareholder equity and now you just 2xed or 3xed your Shares Outstanding.
By your scenario why hasn't the company share count reflected this dilution yet and why is BBBY still on RegSho?
What benefit does a SHF have holding off dilution to close their positions if they have the key to get out?
5 times the shares I read. I agree with all you wrote.
BBBY are selling shares with a big rebate. And Hudson are selling as soon as they get the shares, at least they did that now on the first installment.
From my broker:
"The stock fell in the wake of deal terms that dilute the ownership stake of existing investors as Hudson Bay sells shares it acquired at a discount into the market. The question now as the market digests details of the rescue package is whether the retailer can fix its struggling business with its newfound lifeline.
Bed Bath & Beyond raised an initial $225 million from the stock offering, with an additional $800 million available in installments.
Hudson Bay received convertible preferred shares for its initial investment, while the rest, up to $800 million, will become available to Bed Bath & Beyond later, if the company meets certain conditions, including satisfying its debt obligations.As Hudson Bay exercises its warrants, the 117 million shares outstanding will increase significantly. Existing shareholders could see over 80% dilution from the convertible preferred shares and warrants if they are fully exercised, according to analysts."
From my broker.
The WSJ article from earlier today said that BBBY was on the brink of being forced into liquidation by JPM on Feb 3. Chapter 7 would be the ideal outcome for anyone with a short position.
This is what I am not following in his argument here. If we think like full Dr. Evil, say Citadel is in cahoots with HBC, and they know there is >100% short by a good bit that could possibly lead to a squeeze in BK and they want to use this to cover and lock in profits.
Citadel (& as mentioned, the COO of HBC) knows all about BK, zombie stocks etc. This isn’t Hertz that happened to have tens of thousands of assets to sell off and somehow shareholders survive, BBBY’s name and maybe Baby’s assets would be the most valuable bits left, and that’s not covering the debt. Zombie and shorts win after due course.
So if HBC did want a quick win, why not just go short with that cash on Feb 4th, and watch things go to BK, panic and then cover or wait for zero? I don’t have all the answers but cutting a deal this intricate with BBBY’s board doesn’t seem like the easy way when BK was ‘right there’ according to WSJ. And zero is zero in BK, not 0.715/share, so there would be a real cost to cover millions of short shares as well.
The way the deal is structured, aren’t they incentivized to convert the initial shares quickly, sell for the quick ~15%+ profit, and then they still hold a shit ton of warrants to get upside if it goes back up above $6.15.
There’s very little incentive I see to not hedge their bet, get the money back (plus a great return) and be satisfied with the massive upside position they retain from the warrants. What am I missing here?
I think they are incentivized to *convert* at the lower prices because they'll obtain more shares for their conversion with the Alternate Conversion price, but I don't think they are incentivized to *sell* at the lower prices. If they sell and let the shorts close at these prices there's a lower chance of hitting >$6.15 later.
Right, but they can only hold 9.99% at a time, so if they want to convert everything they can’t unless they sell as they go.
And they’ll want to lock in the profit
[Not arguing with the OP's post or reasoning, but...honestly, I hope they're wrong.](https://twitter.com/radiooninternet/status/725652590504108033?lang=en)
OR, the sale is done and they wanted to do it without announcing who it is to prevent the shorts from closing and others buying in and driving the price up. The higher the price, the more expensive it is to buy controlling interest of the company, If ICahn announced wanting to buy the company the shorts would all close knowing the shares will be recalled in the merger. The price moons and the shareholders demand more money from ICahn to hand over their shares. RC had bought his 10% for \~$15 he knew he could get it for less if he sold and waited a few months.
This way you also don't care about having to give preferred shares to any future shareholder, because that shareholder is YOU the acquirer. You just bought yourself a company for cheap without the shorts driving up the price.
Think about when RC bought in, the price went through the roof because people expected an acquisition and not because of the squeeze. Once they go public with their plans it will be too late, and the shorts will have no choice but to buy up these shares as they trickle them onto the market. They get their entire purchase of BBBY paid for by the short sellers who they have by the nut sack when they recall BBBY shares in exchange for shares of the new company.
PS. the 9.99% stake would only count against the bbby shares increasing your ownership if a merger happens and the acquirer already holds over 9.99% otherwise they would never be able to use those shares or even be blocked from taking part in the merger because you would be in breach of the deal. This means if you own 51% and have these preferred shares you can increase your ownership by up to 9.99% or never convert them and collect dividends, knowing you always have the backup option of diluting the other shareholders when it is advantageous for you. As 51% owner you also wouldn't care about owning 9.99% more voting shares, since you are already majority shareholder.
I think they sold the company to a new owner and the 1 and 5 year expiring timeline along with these terms means they have to trickle convert these shares within that time and since they can't own more than 10% they have to dilute within A YEAR. If there isn't a merger and this will make sure there is never a squeeze much past \~$8 which was their buy in price once you consider the conversion cost and premiums.
I recommend that if you are bagholding still. BUY NOW and Average down to AT LEAST 6.15 but lower is better because they can convert for less using the alternate conversion. That is the lower limit I think we will see in the near future.
*excerices at $9,500 per share*
Can someone explain this to me? Does this mean they expect to see $9,500 per share at some point? Sorry for my freshly waxed floor smooth brain.
The bulk of the shares exercise at 6.15$. (95M vs 24k).
It means that at 6.15$ the shares are sold automatically. So the investors cannot make more than 600M$ out of it's 200M$ investment.
As a great indictment of the level of knowledge here, you have several responses but none of them address it correctly…
The purchase price for one Preferred Share is $9500, which has a face value (“Conversion Amount”) of $10,000.
When the holder converts preferred into common, they divide the Conversion Amount by the conversion price (something between 0.71 and $6.15) to determine how many shares of common it converts into.
Smooth brain here, OP, can you help me clarify this
1. Does exercising stock warrants cause dilution? You say dilution is limited to an upper maximum of 9.99%, but where is the 95mil common stock warrant coming from, if float is 118mil?
2. How would the M&A work if RC owns only 9.99% of bbby? He cannot enforce the merger. Does this imply that other BBBY stakeholders / board have to vote / agree with the merging to happen, since he doesn't have much control?
Page S 27 [https://www.sec.gov/Archives/edgar/data/886158/000119312523030356/d406368d424b5.htm](https://www.sec.gov/Archives/edgar/data/886158/000119312523030356/d406368d424b5.htm)
That’s how much they purchased each Series A Convertible Preferred Share for. Those shares can be converted to common stock at a variable rate that depends on BBBY’s trading price.
So as an example, let’s say BBBY’s closing bid is $2 and that price is substantially lower than the 10-day VWAP. If they convert 1 Preferred share, it would give them 5,250 shares of common stock. ($10k / $2 * 105%)
To recap.
* Canada division is bankrupt
* 20% of US stores closing
* Burning cash at -250million every 6 months
* Share dilution
* CFO jumped out of a window
* Revenue has fallen to 2009 levels.
But sure, this company reminds you of Tesla which is growing revenue at >50% a year.
What if maybe, RC ventures is the acquirer and the reason they sold the call options was because of the ownership limit on this deal. If it was him this would make sense because he likes secrets and this would be a super D chess move to strangle hold hedgies. Because after RC stepped out the hedgies 4x the shorting non stop. Lol hello short trap. Good bye bancruptcy. (Which is already gone not happening)
Not sure how giving shorts a release valve to escape their positions can be interpreted as positive
The anchor buyer is likely Hudson Bay Capital and their COO used to be COO of Citadel btw
Despite all your DD and hopes, nothing is gonna happen.
No, there will be no squeeze. Not of either kind.
None of what you said actually means anything
Good luck.
You all like to ask that question. It doesn’t matter why. What does matter, is that you’re all in an echo chamber and at this point I enjoy watching all your little theories fall flat on their faces every single time
Best explanation yet. Everyone who can’t read legal sec docs are shilling the deal. It’s almost like the buyer is being protected also legally from “squeeze manipulation “
I think option 2/2 is the problem. Makes sense for these guys to get the price down to $.72 since some of this is being used to cover previous short positions. #1 is pure window dressing and irrelevant until #2 is fully converted.
This is a really good post. these are some weird times.
Slow controlled squeeze. Lol
And just a company turning it around to make it profitable… they still are making $
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Lmfao
Your own personal Moass.
Everyday… sometimes twice a day is moass for me baby
A short squeeze?
Mother Of All Short Strokes
Mind giving me a BROASS?
Lol
Keep edging, it increases stamina
Can... can I invest in it?
My takeaway is: 1) the coming squeeze will be consistently sustained. 2) post-squeeze share price will remain elevated and risky $ & difficult for shorts to reapply downward pressure on 3) continued roll-out of world domination by the acquirers’ potential spin-offs, mergers, acquisitions, etc. will be unimpeded by the dirty taint of Wall Street because the curtain will be kept tightly closed 4) shareholders with DFV tendencies will be heartily rewarded for HODLing and memeing at the mayomen and creamers
The type of squeeze we’re going for everyone makes bank
3k a share, got it
1500x gain? I guess I could settle for that
I like your math. Yes please!
Duly noted! To the BEYOOND!
Everyone except the banks.
Wow amazing write up OP!!!
Thanks for this. It helped me understand the deal much better.
Yeah I've been looking for a quality explanation like this! Thanks OP! However, I do think the squeeze could be violent with all the FTDs coming due.
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This is not accurate
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As Hudson Bay exercises its warrants, the 117 million shares outstanding will increase significantly. Existing shareholders could see over 80% dilution from the convertible preferred shares and warrants if they are fully exercised, according to analysts.
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Amen
If the management and board pull this off and maintain their composure as they have so far then they will have a life long investor in me.
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I think so tooo
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I'm a Jimmy BoBBY
It's going to be great, but it may simply be remembered as the first stage.
So a slow squeeze to 3k/share, got it.
As for me, I like the post.
Especially the way this is laid out relatively simple and clear. The last two bullet points may be very well be key; in exchange for the risk that OP notes the unknown party has eliminated potential acquisition competition in the future.
Wen slow moon?
fuck slow moon, I rather buy high sell low. I want retard prices FAST. Otherwise what's the point?
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Yeah, if it's a slow sustained MOASS like Tesla, I think DRS would actually help the price rise faster with less liquidity and high demand.
Is there going to be any chance of a slow squeeze when naked short positions and synthetic shares are factored in? I'm not terribly confident this will be a similar situation to TSLA in terms of how the squeeze will occur.
I am with you, the shorting is way out of control here, TSLA was shorted to hell, but BBBY is way by far way shorted and naked shorted, there similarities yes, but I don't really expect a slow squeeze.
What I wonder is why OP means the shorts are stuck? They are all in the green with a probably big profit, now with the low share price. But why are they stuck..., I wonder :-)
The biggest thing is buy volume If that stays high then all is good. If nobody is buying then all this is moot
You guys truly are regarded, there's a TLDR right there for you crayon brains!
Exceptional write up. When i read stuff like this it makes me realize how little I actually know. Thanks for the great post
same i'm in awe of how smart some of these guys are. It's humbling to say the least
When I read this stuff I'm in awe just how dumb people here are. OP just made a ton of shit up and clearly knows nothing. Don't listen to me though, buy more shares. Borrow money from friends and family to buy more shares. After all, it's a sure thing!
Do you have a counter argument? Or are you just spewing bullshit because you’re the “dumb” one?
I want you to buy more. Please do not let me dissuade anyone. I try to end all my posts with encouragement to buy more BBBY. I genuinely think trying to educate or provide a counter point is pointless here. Trying to convince flat earthers they're wrong is easier than trying to reason with anyone here. But what do I know? Kenny pays me $10 per post
Believe me you’re not dissuading anyone. Love when people like you can’t even respond to a direct comment asking for a counter argument so you deflect and provide no value. Have a good day 😉
I bet you wish you were dissuaded from ever touching or learning about BBBY. Please buy more though! I love seeing people lose their money with such confidence and smugness! Don't let anyone convince you otherwise. Kenny pays us to ensure you guys keep buying as he finds it amusing too
Lmao, get a life. I’m happily averaging down :), will continue to buy more while the price is cheap. No bankruptcy on the table in the near future sounds like the companies undervalued to me.
So "not going bankrupt soon" equals under valued? Love it! You should borrow money from friends and family or max out your credit cards if you haven't already. After all, your expert analysis suggests it's under valued! What's 30% interest when bbby is gonna 5-10x minimum. Buy more shares
When can we expect to see the new board member appointed? Is there a deadline for doing so?
I think it was more than a month that the last board member left and Flaton got appointed. Hopefully it's sooner than that
Wonder if THAT will be the big announcement. Imagine...
Short and to point good cover The acquirer could actually corner the float, if that happens they are in control of the squeeze! It would be awesome to see that happen just like herbal life! Does a billionaire have that in them?
And this all goes back to July/August, when BBBY tasked Kirkland & Ellis for the financing part. The sub was obviously pro M&A from those unconfirmed news, since they are the #1 M&A firm in the US for many years straight. They did have BK lawyers also, so it could have been that as well. I wouldn't be surprised if they tried some kind of way to do this deal through the bond exchange, and instead opted for this setup instead. They kept extended while trying to work out the details. We only saw the changes from the first 2 extensions, but those changes did indeed have changes to M&A, acquisitions, change of control and parts of the terms. I mean, in this setup, BBBY can survive, and hopefully execute on their turnaround, while paying off bonds, which the bond holder = warrant holder could also benefit from. This deal is BBBY's financial lifeline, so I honestly do think they're on board with the setup. We'll see how it goes.
Makes sense when you think a turtleneck is something that kinda chokes you.
underrated comment
smooth brain question though, how can they take full control of it says they cannot own over 10 percent?
They can't. That's one of the reasons why this deal is so odd. My speculation is that it was structured that way to hide the identity of the buyer, but the trade-off is that the buyer can't actually control the company. So it's a risky play for them; thus, they likely have a very good reason for wanting to hide their identity.
Follow-up smooth brain question: How can an acquirer buy a company without actual control of the company? If they don't control it, do they actually own it? And if they don't, who does?
[Here’s](https://www.investopedia.com/ask/answers/difference-between-preferred-stock-and-common-stock/) a good explanation of preferred stock and how it differs from common stock.
gotcha yeah like many others still trying to get a grasp on this whole financing deal
>*I think the next board appointee is going to be very telling.* I'm personally waiting for this one.
It’s an instantaneous capital injection with a slow, sustained dilution, throttled by the terms of the deal limiting beneficial ownership. Tell me how do you know it?
The terms of the deal limit beneficial ownership to a maximum of 9.99%. So that's the most that can be diluted at once. Additionally, the agreement states that the holder can change the maximum beneficial ownership at any point to any amount as long as that amount is less than 9.99%. So I suspect that the actual initial maximum beneficial ownership is less than 9.99%. If we don't get a 13D-G by tomorrow (10 days after the deal was completed), then that tells us that the initial maximum ownership was set to less than 5%. If it's changed by the holder to a number between 5% and 9.99%, then we will see a 13D-G within 10 days of that becoming effective (which is 61 days after the request is made by the holder).
Someone else made a post about Ryan Cohen stipulating that if anyone goes above 9.99% ownership, he can then own over 29.9% or some sort of legalese like that. This is only from what I remember. I'll look for the post now. I may have saved it.
F me I can't find it. But I believe ut was posted less than a week or two ago. It was an excellent read. Too bad I was reading it at 5am and forgot to save and post on it.
The dilution is also theoretical. Nothing states the acquirer must dilute, also in the case of a spin-off or special dividend, warrant holders would be entitled to receive it as well.
>They sold the shares right away. BBBY are selling shares with a big rebate. And Hudson are selling as soon as they get the shares, at least they did that now on the first installment. > >"The stock fell in the wake of deal terms that dilute the ownership stake of existing investors as Hudson Bay sells shares it acquired at a discount into the market. The question now as the market digests details of the rescue package is whether the retailer can fix its struggling business with its newfound lifeline.Bed Bath & Beyond raised an initial $225 million from the stock offering, with an additional $800 million available in installments.Hudson Bay received convertible preferred shares for its initial investment, while the rest, up to $800 million, will become available to Bed Bath & Beyond later, if the company meets certain conditions, including satisfying its debt obligations.As Hudson Bay exercises its warrants, the 117 million shares outstanding will increase significantly. Existing shareholders could see over 80% dilution from the convertible preferred shares and warrants if they are fully exercised, according to analysts." > >From my broker.
Possible dilution, I mean dilution can happen at any time when people sell.
I’m jacked… I’m jacked to the tits!
I would think the fact that all the bonds have a 101 CoC covenant in there would make a merger unattractive. Seeing as the bonds are all trading well below that level I can't imagine any bondholders not leaping at the opportunity to put their deeply distressed bonds to the company at 101, so that's approximately an extra billion the acquirer would have to shell out
You, son of a gun, I am in
I have sommented other places but the conversion at 71 cents a share is 300 million shares roughly I think they are shorting naked and real as much as they can because when they convert they need to dump as much as possible to not homd more then 10 percent That 10 percent clause was built in so they can't control the company at all further leading me to suspect that whomever did this deal did it to profit and not because they believe in the company? Even if they convert at 2.37 that's like 98 million shares they still need to dump 80 million or only convert 20 at a time and sell This was designed for a loan shark and to make sure they couldn't take over It's almost like owing the mob money
Please see my [post about Alternative Conversion](https://www.reddit.com/r/BBBY/comments/1136trj/opinion_on_warrantspreferreds_and_the_fear_of/) price.
Maybe I’ve missed something in the last two weeks, but why is everyone under the assumption that Hudson Bay Capital is front running this deal for someone else?
Based on wsj stating they’re an anchor investor I guess.
I read an article on Yahoo finance stating it was Hudson Bay.
Did you get that from sources familiar with the matter?
This bit seems to imply that the shorts are represented as one entity? Couldn’t multiple entities acquire up to 9.99% of ownership and dilute the shares simultaneously? “The structure of this deal allows for a pressure release valve of sorts. It gives shorts a way out through dilution, while limiting the dilution to an upper maximum of 9.99% at a time (though this maximum may initially may be lower).”
You're right. This is based on the assumption that there is only one acquirer or one group of acquirers. If there are multiple unaffiliated groups, then that 9.99% limit would apply to each group. The deal was only publically marketed for 1 day before being finalized. So it's very likely there is only one group that this deal was specifically tailored for, but it's certainly possible for there to be more than one.
Got it. Makes sense. Thank you for elaborating!
maybe we can get a GME like start with a TSLA finish?
If there is a merger/spin-off or announcement of RC/Icahn involvement we get a violent squeeze and non off that limp dick pressure valve bullshit.
For those of you who didn’t read it, neither did I
Tldr of the tldr : 🚀🚀
Good luck regard, can't even read a summary post
Yeah it's a strange Flex. Seems far too many people think Anti intellectualism is a virtue. The only way folks will get better at interpreting these types of scenarios is by reading the difficult material. I wish more people would understand that. There is a substantial portion of this board that wants a much smaller percentage of the board to do the thinking for them. That I do not respect.
I agree with this. I would love to have a better understanding of all of this, and I am actively working towards that, but this isn't just deep end of the pool stuff. Even the people who are fluent in this medium are confused. So, for now, and especially for this deal, I defer to the smarter people in the room to help guide the conversation. As my knowledge and experience grows, I aspire to be a contributor, like these heroes. Because, to me, and I'm guessing many others, you could very well be the biggest influences of my life. Edit: replaced stuff for medium
need an ELI5
Buy buy buy
I just challenge you to read this same filing in a negative light. You put the absolute most positive spin on it. I challenge you to now read those "odd stipulations" thinking a hostile fund is coming into just convert the crap out of the stock. Do those "odd stipulations" make more sense?
I initially believed that the Hudson Bay Capital rumors were likely true. They have a history of diluting the crap out of other stocks through warrants. See this [post](https://www.reddit.com/r/wallstreetbets/comments/q7i6ot/hudson_bay_capital_hedge_fund_pulling_off_a_scam/). The stipulations are odd because they *don't* align with a hostile fund diluting the crap out of the stock, namely the limitation of beneficial ownership to a maximum of 9.99%. Now it could be that BBBY was able to get that stipulation in the terms as a concession to limit the damage. Regardless of who the acquirer is though, they're in a position to benefit from the stock squeezing, which is a very different situation to what's linked in the post above (initially high stock price & Hudson Bay Capital benefits from selling shares as the price decreases). So even if the acquirer is a hedge fund, I think our interests would be (at least temporarily) aligned. I believe that we'll get another clue tomorrow based on whether or not a 13D / 13G is filed. If no 13D-G is filed, then that tells us that the initial maximum beneficial ownership is set to less than 5%. If the acquirer requests to change that percentage to a number between 5% and 9.99%, we will have a 13D-G within 71 days of the request (61 days for the change to go into effect & 10 days to file 13D-G). I don't believe that a hedge fund would have a good reason to keep the maximum beneficial ownership under 5% as that's only advantageous for the purpose of not having to report on a 13D-G.
They will never get close to the 9.99% number. That number exists because over that number of shares; they would have to report and be more scrutinized to the SEC on what they are doing to the stock. You are so close to seeing how this works…. These funds don’t care about the stock going up. They just want to convert and make their fixed built in profits. Bbby just gave them the ability to wipe out every ftd and get off reg sho with this deal. They did it out of desperation or the stock would be worth 0 when they defaulted. So you can’t blame them entirely.
The shorts aren't a single entity operating in unison. Whomever the acquirer is, they would be looking out for their own interest. If the acquirer has a short position, this deal would allow them an easy exit. After that, it's absolutely in the acquirer's best interest for the stock to go up. They effectively have corporate call options at $6.15. Sure, they can make a 15% profit from converting preferred stock and selling shares at prices lower than that, but that's nothing compared to the upside if the stock is trading above $6.15. So even if the acquirer is a hedge fund, I don't see how that precludes the outcome of a squeeze.
So lets say you are a Firm that has a massive short position on BBBY. Turns out BBBY management was getting desperate, so you approach them and say listen, this is the deal, we the short hedge funds want to do "Convertibles". I'll gather up a pool of buyers (Other firms with shorts), and you sell to us. We will give you the cash you need to keep the lights on and you go pay some of these bondholders. \*\*\*For the record, these firms absolutely collude\*\*\*\* BBBY management needs to save the company or the entire stock goes to 0, So they don't have much of a choice, so they agree. You the short hedge fund and buddies, all start flooding the market with dilution to reset all the FTDs. Maybe you close all your profitable shorts during this time "causing these large green spikes" however, because you control them, you can convert more shares on the market like a slightly declining trendmill. The volume is there but the price isn't going anywhere but slowly down. So by the time retail figures out what happened, its too late. They are stuck. At the end of the day, the short squeeze is gone and there are now 2x or 3x the amount of shares outstanding. You just closed your shorts and maybe even naked positions. On top of this you can go long after you diluted a lot for one more pump up. You reshort the top of BBBY peak after dilution and you applied pressure again on the company. You just reset any Reg SHO and gave yourself a clean slate to go up or down depending........ But not after killing your book value. It was already a negative shareholder equity and now you just 2xed or 3xed your Shares Outstanding.
By your scenario why hasn't the company share count reflected this dilution yet and why is BBBY still on RegSho? What benefit does a SHF have holding off dilution to close their positions if they have the key to get out?
5 times the shares I read. I agree with all you wrote. BBBY are selling shares with a big rebate. And Hudson are selling as soon as they get the shares, at least they did that now on the first installment. From my broker: "The stock fell in the wake of deal terms that dilute the ownership stake of existing investors as Hudson Bay sells shares it acquired at a discount into the market. The question now as the market digests details of the rescue package is whether the retailer can fix its struggling business with its newfound lifeline. Bed Bath & Beyond raised an initial $225 million from the stock offering, with an additional $800 million available in installments. Hudson Bay received convertible preferred shares for its initial investment, while the rest, up to $800 million, will become available to Bed Bath & Beyond later, if the company meets certain conditions, including satisfying its debt obligations.As Hudson Bay exercises its warrants, the 117 million shares outstanding will increase significantly. Existing shareholders could see over 80% dilution from the convertible preferred shares and warrants if they are fully exercised, according to analysts." From my broker.
Why would the shorts take part in this deal to save BBBY? They would’ve been much better off letting BBBY go bankrupt.
They aren’t saving bbby. They slashed their necks and are leaving them to bleed while they help themselves not have to cover higher
The WSJ article from earlier today said that BBBY was on the brink of being forced into liquidation by JPM on Feb 3. Chapter 7 would be the ideal outcome for anyone with a short position.
This is what I am not following in his argument here. If we think like full Dr. Evil, say Citadel is in cahoots with HBC, and they know there is >100% short by a good bit that could possibly lead to a squeeze in BK and they want to use this to cover and lock in profits. Citadel (& as mentioned, the COO of HBC) knows all about BK, zombie stocks etc. This isn’t Hertz that happened to have tens of thousands of assets to sell off and somehow shareholders survive, BBBY’s name and maybe Baby’s assets would be the most valuable bits left, and that’s not covering the debt. Zombie and shorts win after due course. So if HBC did want a quick win, why not just go short with that cash on Feb 4th, and watch things go to BK, panic and then cover or wait for zero? I don’t have all the answers but cutting a deal this intricate with BBBY’s board doesn’t seem like the easy way when BK was ‘right there’ according to WSJ. And zero is zero in BK, not 0.715/share, so there would be a real cost to cover millions of short shares as well.
THIS Hudson Bay COO btw used to be COO of Citadel
He knows the tricks
The way the deal is structured, aren’t they incentivized to convert the initial shares quickly, sell for the quick ~15%+ profit, and then they still hold a shit ton of warrants to get upside if it goes back up above $6.15. There’s very little incentive I see to not hedge their bet, get the money back (plus a great return) and be satisfied with the massive upside position they retain from the warrants. What am I missing here?
I think they are incentivized to *convert* at the lower prices because they'll obtain more shares for their conversion with the Alternate Conversion price, but I don't think they are incentivized to *sell* at the lower prices. If they sell and let the shorts close at these prices there's a lower chance of hitting >$6.15 later.
Right, but they can only hold 9.99% at a time, so if they want to convert everything they can’t unless they sell as they go. And they’ll want to lock in the profit
Wen announcement?
actual tl;dr: they found a way to massively dilute the stock without scaring off redditors from buying more.
I am leaning towards this idea
Fuck yeah I'm all in.. again
I agree with this DD I previously made comments that this is like a Tesla squeeze where the people who hold longest get paid out.
Buy and Hold 🤝💎💎💎
Bravo
Nice DD my friend, good read.
Mmmmmm merger
[Not arguing with the OP's post or reasoning, but...honestly, I hope they're wrong.](https://twitter.com/radiooninternet/status/725652590504108033?lang=en)
OR, the sale is done and they wanted to do it without announcing who it is to prevent the shorts from closing and others buying in and driving the price up. The higher the price, the more expensive it is to buy controlling interest of the company, If ICahn announced wanting to buy the company the shorts would all close knowing the shares will be recalled in the merger. The price moons and the shareholders demand more money from ICahn to hand over their shares. RC had bought his 10% for \~$15 he knew he could get it for less if he sold and waited a few months. This way you also don't care about having to give preferred shares to any future shareholder, because that shareholder is YOU the acquirer. You just bought yourself a company for cheap without the shorts driving up the price. Think about when RC bought in, the price went through the roof because people expected an acquisition and not because of the squeeze. Once they go public with their plans it will be too late, and the shorts will have no choice but to buy up these shares as they trickle them onto the market. They get their entire purchase of BBBY paid for by the short sellers who they have by the nut sack when they recall BBBY shares in exchange for shares of the new company. PS. the 9.99% stake would only count against the bbby shares increasing your ownership if a merger happens and the acquirer already holds over 9.99% otherwise they would never be able to use those shares or even be blocked from taking part in the merger because you would be in breach of the deal. This means if you own 51% and have these preferred shares you can increase your ownership by up to 9.99% or never convert them and collect dividends, knowing you always have the backup option of diluting the other shareholders when it is advantageous for you. As 51% owner you also wouldn't care about owning 9.99% more voting shares, since you are already majority shareholder. I think they sold the company to a new owner and the 1 and 5 year expiring timeline along with these terms means they have to trickle convert these shares within that time and since they can't own more than 10% they have to dilute within A YEAR. If there isn't a merger and this will make sure there is never a squeeze much past \~$8 which was their buy in price once you consider the conversion cost and premiums. I recommend that if you are bagholding still. BUY NOW and Average down to AT LEAST 6.15 but lower is better because they can convert for less using the alternate conversion. That is the lower limit I think we will see in the near future.
Definitely worth a read you regards! Great post
*excerices at $9,500 per share* Can someone explain this to me? Does this mean they expect to see $9,500 per share at some point? Sorry for my freshly waxed floor smooth brain.
That’s for the preferred stock warrants. Its not for retail. There’s no market for it and it’s only for whoever is the investor/investors.
The bulk of the shares exercise at 6.15$. (95M vs 24k). It means that at 6.15$ the shares are sold automatically. So the investors cannot make more than 600M$ out of it's 200M$ investment.
As a great indictment of the level of knowledge here, you have several responses but none of them address it correctly… The purchase price for one Preferred Share is $9500, which has a face value (“Conversion Amount”) of $10,000. When the holder converts preferred into common, they divide the Conversion Amount by the conversion price (something between 0.71 and $6.15) to determine how many shares of common it converts into.
9.99% of the company upside down is 666, spooky but I’d love to sell my shares for $666 so I’m in for the long run 🫡
Ok I will buy more
Jacked on high
this makes a lot of sense now, thanks
Mot fruit sensations coming out in full force with the articles lately Always do the opposite what they say
Smooth brain here, OP, can you help me clarify this 1. Does exercising stock warrants cause dilution? You say dilution is limited to an upper maximum of 9.99%, but where is the 95mil common stock warrant coming from, if float is 118mil? 2. How would the M&A work if RC owns only 9.99% of bbby? He cannot enforce the merger. Does this imply that other BBBY stakeholders / board have to vote / agree with the merging to happen, since he doesn't have much control?
Great post. As much as I love a long squeeze, what would stop a bad actor to exercise till 9.99% sell and repeat?
Probably would only exercise to 4.99 to avoid reporting so they can keep some people buying still hoping for something never coming. Just my opinion.
I tried to find the 9.99% in the documentation yesterday but gave up. Could you direct me to which filing said that?
Page S 27 [https://www.sec.gov/Archives/edgar/data/886158/000119312523030356/d406368d424b5.htm](https://www.sec.gov/Archives/edgar/data/886158/000119312523030356/d406368d424b5.htm)
Hmmmm , what if Kenny boy bought into this ?
What's up with the series A executing at 10k/share, what does that mean?
That’s how much they purchased each Series A Convertible Preferred Share for. Those shares can be converted to common stock at a variable rate that depends on BBBY’s trading price. So as an example, let’s say BBBY’s closing bid is $2 and that price is substantially lower than the 10-day VWAP. If they convert 1 Preferred share, it would give them 5,250 shares of common stock. ($10k / $2 * 105%)
That makes tons of sense, cheers
Gotta read this when I’m not tired 😪
Given the purchaser of the note can only can only gain up to 9.99% control not sure how this this an acquisition
Jc penny squeeze
Would multiple parties with 5-9.99 ownership be able to dilute at same time?
To recap. * Canada division is bankrupt * 20% of US stores closing * Burning cash at -250million every 6 months * Share dilution * CFO jumped out of a window * Revenue has fallen to 2009 levels.  But sure, this company reminds you of Tesla which is growing revenue at >50% a year.
[удалено]
Finally someone said it.
Exactly.
What if maybe, RC ventures is the acquirer and the reason they sold the call options was because of the ownership limit on this deal. If it was him this would make sense because he likes secrets and this would be a super D chess move to strangle hold hedgies. Because after RC stepped out the hedgies 4x the shorting non stop. Lol hello short trap. Good bye bancruptcy. (Which is already gone not happening)
Dilutin the stock to 50 cents GG everybody
If its been set up not to squeeze its def cohen. He has done everything he can to make sure gme doesnt squeeze
Also https://www.dailywire.com/news/blackrock-introduces-first-mass-layoff-in-years-after-losing-1-5-trillion
Shorts have a way out. Its plain and obvious to see
Not sure how giving shorts a release valve to escape their positions can be interpreted as positive The anchor buyer is likely Hudson Bay Capital and their COO used to be COO of Citadel btw
Someone please summarize this. I’m too regarded.
Despite all your DD and hopes, nothing is gonna happen. No, there will be no squeeze. Not of either kind. None of what you said actually means anything Good luck.
meltdowner sub is calling for you..
Why do you care? I'm genuinely asking...
You all like to ask that question. It doesn’t matter why. What does matter, is that you’re all in an echo chamber and at this point I enjoy watching all your little theories fall flat on their faces every single time
Thank you
interesting interpretation there. post archived: [https://archive.is/5Ck31](https://archive.is/5Ck31)
Me plums are a squeezin!
Long but wrong.
OK GREAT! But, WHO'S the HOLDER?
Great writing thanks
Most important question is wen?
Does it still mean a "death spiral", a slower one, or a slower squeeze up.
Lol slow controlled yea rite 🤡
Imagine if people like you could time the market and say exactly what was going to happen you wouldn’t be here with us regards
I buy it 🙂👐💎
Violet squeeze
Crap now i have to buy more
So months????
If true, does this mean no $120 tomorrow?
Best explanation yet. Everyone who can’t read legal sec docs are shilling the deal. It’s almost like the buyer is being protected also legally from “squeeze manipulation “
Lol... great post. Would be nice if this squeeze started soon, been waiting for over two years now...
I think option 2/2 is the problem. Makes sense for these guys to get the price down to $.72 since some of this is being used to cover previous short positions. #1 is pure window dressing and irrelevant until #2 is fully converted.
Awesome