The Bed Bath and Beyond Meme Stock *Wipeout.*

Bed Bath and Beyond absolute and complete disaster and it shows you the

danger of investing in momentum movers and actually trying to hoddle momentum

movers now look I'm not here to bag on Bed Bath and Beyond I like my 20 off

coupons as much as the next person and I grew up as a millennial going to Bed

Bath and Beyond and buying you know Oxo stuff and the KitchenAid mixers you know

and the towels they always had so much inventory of towels it was so cool so I

want that color this season and that color that's I miss the good old days of

retail stores and Bed Bath and Beyond it's nostalgic it's it's just as

nostalgic and being in line at GameStop for the midnight release of every single

version of World of Warcraft okay or Splinter Cell okay it didn't matter what

midnight released it was Call of Duty I was there it reminds me of the good old

days of Black Friday where there's so many people in the store you felt like

you were on a Japanese Subway and you were about to suffocate to death because

there were so many people there or you are in a South Korean alley okay no too

soon for that so anyway look we got to know what's going on with Bed Bath and

Beyond because the darn stock ran up almost a double and one of the biggest

warnings that I've had is when it comes to momentum-based stocks when we know

this as soon as the momentum goes away the stock Falls it's very simple and the

goal though is to trade that right so what happens is you get volume increases

the stocks skyrockets when the volume goes away the stock Falls it's the

simplest trade ever the problem is people will hold on to their trade

because they think oh we're in the next momentum wave

but the companies that are facing profitability problems or they're

becoming a penny stock or which basically a Bed Bath and Beyond has

become because they're facing bankruptcy these companies need to raise money so

here's a company that actually did the smart thing they actually are now trying

to take advantage of the meme movement and so as their stock ran up 92 percent

yesterday what does the company do oh no surprise they conduct an offering this

is what I've been warning for months be careful about getting into profitless

companies there's a reason that I say that the companies you want to pay

attention to are companies with high free cash flow you want stable revenues

even even in the face of discounts right and you want ideally strong margins

those are the companies you want in my opinion to invest in now this isn't

personalized Financial advice for you I don't know what your situation is but I

am Eliza's financial advisor I run an ETF uh and I do this stuff for a living

on a daily basis and the big concern about putting a lot of your money into

companies that don't have high free cash flow that are losing money and don't

have strong margins is the potential that you're just going to get diluted so

that way the company can stay alive just a little bit longer and that's exactly

what Bed Bath and Beyond did yesterday they basically announced a near 1

billion dollar series a convertible stock offering in warrants the company

expects to raise 225 million dollars of gross proceeds uh from the offering

together with another 800 mil from the issuance of Securities related to their

warrants now this is basically to say they're

going to their company to their stock and they're saying hey look our company

has a market cap of 700 million dollars after a meme rallied up nearly double

from 350 million dollars approximately why don't we just raise a billion

dollars which is more than our market cap and as long as we get investors hey

maybe it could help us avoid bankruptcy and what are we going to do with that

money well we're going to buy some inventory we're going to make sure we

pay off the inventory debts that we owe like using this hundred million dollars

to pay off our first and last out facility we're going to pay off the

outstanding loan facility that we have under our abl facility whatever it's

like a credit line right we're going to make payments on the missed interest

payments on the notes that we have that are due March 3rd and maybe we'll have

some money over to prevent us from going into bankruptcy but no guarantees if we

can't raise this money we might still end up going bankrupt so anyway what

they're basically doing is they're pulling an AMC they're taking every meme

investor and momentum investors money and they're basically saying hey thanks

for buying our stock we're now going to dump on you and we're going to make you

lose the money that you're now being a bag holder on basically and we're going

to use that to try to bail out our own company this is basically the same exact

thing that AMC did with ape and yeah sure AMC has been rising recently but

when we zoom out we can clearly see what's been happening with AMC the trend

is not great now AMC is doing their best to pay off their debt but they're doing

so with your money as an investor in the company as an investor in a company

who's losing the company's losing money they will take the equity you provide to

them and the liquidity you provide to them in the stock market and use that to

pay off debts this is what companies do that lose money and this is why I prefer

companies that have free cash flows positive operating margins up a positive

operating leverage they can increase their their revenue or keep revenue

stable while maybe reducing Opex right or growing up X at a lower rate and Bed

Bath and Beyond is not that look at this this is a company that has net sales

ending in the quarter November 26th of 1.25 billion dollars the sales at Bed

Bath and Beyond have plummeted by about a third look at that 1259 divided by

1877 that puts you at a decline of about 33 in sales so sales are falling 33

percent their gross margin uh or their cost of

goods sold sits somewhere at 78 nearly 78 of every dollar they make is going

into actual cost of product but then they've got this insane operating

expense uh where they actually end up with an operating loss of around 450

million dollars net income here loss of about nearly 400 million dollars they're

losing money like crazy and if we jump on over to their cash flow statement

let's see what they got we got the balance sheet over here so we could look

at it in just a moment we look at their cash flow statement here's their net

loss and their actual cash flow is negative

307 million minus an additional 100 Mil in capex you're sitting at around

negative 400 million dollars in cash flow for folks the three months ended in

November if you go to their negative cash flow for the last nine months of

believe this is this is negative cash flow yeah nine months ended November

their negative cash flow is actually 890 plus 322. their negative cash flow in

nine months is 1.2 billion dollars oh look that's literally three times their

current negative cash flow so they're literally losing 400 million dollars a

quarter 400 million dollars a quarter divided by 90. this company is literally

throwing out the window 4.4 million dollars a day that's what this company

is burning just trying to stay alive it makes absolutely zero fundamental sense

that the company would rally at all on anything other than just stupid momentum

trading on a penny stock that's all this is and so it's no surprise that when

there was stupid momentum trading on a penny stock with with a you know a small

market cap and low liquidity in the share price because who in the right

mind is actually buying this to hold it it's no surprise that when the company

issues a suggestion that hey we're going to try to raise a billion dollars we're

going to dilute all our shareholders it's no surprise that the sucker Falls

uh nearly over 40 percent now it's remarkable because some people who don't

understand math very well will say but Kevin it's up 92 percent now it's now

it's down 40 that means it's still up more right uh no that's actually not how

it works see we're sitting over here at three dollars and fifty cents and the

sucker memes up nearly double but if you double and then you lose half you're

basically at the same spot right I mean think about it if you have a five dollar

stock and it doubles you're at ten dollars if you now Fall by half you're

right back at five Math is fun anyway it is absolutely

ludicrous that anybody would touch Bed Bath and Beyond stock with with any more

than a complete speculative mindset and when you look at a company like Bed Bath

and Beyond you should run the suckers going bankrupt and it doesn't have

assets like Hertz people look at these bankrupt companies and they think these

bankrupt companies are going to kill it like Hertz did post bankruptcy but

people forget that the reason Hertz did well post bankruptcy is because they had

assets that were going up in value not down in value they had used cars during

the used car shortage and guess what that meant it shot the asset value of

Hertz to the moon so of course companies went in to bid the crap out of Hertz

because they had a lot of good product used cars that became substantially more

valuable than the original estimates uh for what uh what the assets were worth

at Hearts so Hertz ends up meme stocking up through bankruptcy recovers from its

restructuring and because they have all this inventory and these incredible

buyouts and then they end up with new management that actually gets into

leasing electric vehicles and they rebuild they used to or the the leasing

business and they get new inventory after selling out their old inventory at

a profit it's no surprise the company does well after bankruptcy that is very

different from Bed Bath and Beyond the according to Bloomberg the executives

had a meeting with all their staff and guess what the executive said to help

solve their problems they're like we need more corporate staff instead of

working from home we need you all coming in an extra day and somebody yells out

of the audience like picture this okay I picture this to sort of you got like a

table of Executives like all right guys we're going to try to save the company

and in doing so less work from home more in person Face to Face Time and and then

you get the people in the audience that are like

somebody shouts out allegedly somebody shouts out and goes working coming in

one more day is not going to make our company not lose money and apparently

the audience like the other employees at the company start nodding and basically

cheering and clapping like yeah exactly like right on like why don't you

actually fix the damn company and the reality is Bed Bath and Beyond is a

failure Bed Bath and Beyond is a Sears it failed to adapt it failed to pull a

Best Buy now that's my opinion okay Best Buy used to be a fantastic store a great

competitor against Circuit City then their return policy started turning to

crap and their customer service went to trash the company started failing the

company was going and trending towards bankruptcy they were going to become the

next Circuit City and they were going to go bankrupt but guess what bad uh what

Best Buy did they realized wait we need to loosen our return policies we need to

get into e-commerce and we have to focus on better customer service and guess

what Best Buy is a success story they turned it around you could buy stuff

online on their website their inventory management system is even better than

Walmart's Walmarts is trash Walmart tells you they have stuff in stock and

then they don't then they cancel your order a few hours later I'm sorry you

don't actually have it in stock it's like your website says we have in stock

yeah our systems aren't aligned with what we actually have online versus what

we actually have in store and I'm like you this is like an elementary problem

y'all are idiots uh but that's Walmart for you Best Buy and Walmart doesn't

even make that much money there's no reason like their stock should plummet

there's no reason their socks doing as well as it has been over the last year

the only reason it has been doing so well is because it's deemed a staple and

people move into Staples in a recessionary time so you're basically

getting Trader momentum in Walmart anyway and it's Trend momentum too

anyway Best Buy adapted Best Buy became a functional online e-commerce platform

that you can actually use Best Buy as a competitor at Amazon you could price

match with Amazon you could get your product same day which you can't do with

Amazon and they really sell you on those Services now I'm not saying you need to

use those and I've never used them myself but now you buy a TV at Best Buy

they'll come install it for you they'll do the mount for you want to buy an

appliance why would you buy it on Amazon if you could go have Best Buy do it all

for you start to finish and install it for you and make it all easy for you

want to buy a surround system for your home why buy it on Amazon where you have

to figure out what all the damn wires do when you can just hire Geek Squad to do

it for you it's actually very very smart Amazon's been trying to get into it by

subcontracting to local vendors but it's been very difficult for Amazon to

actually pull off successfully and they've kind of been winding back that

program because it's been hard for them whereas Best Buy actually has local

employees who can do it for you it's pretty impressive but it shows you how

different a company like Best Buy is from a loser like Bed Bath and Beyond I

hate to say it but that is what it is so I don't know that's that's my stick on

Bed Bath and Beyond and the rip-off and that's happening in sort of the momentum

world and why if you are fomoing because you see certain momentum stocks that are

going up like 30 percent and the quality companies that you're investing in are

going up like four or five percent right you should be looking at those meme

stocks and going thank you because eventually when meme stocks run up the

Quality Companies come up and then the meme stocks get diluted and they plummet

and crash and burn so think about it as a good thing