Bed Bath & Beyond Inc said on Tuesday it raised about $225 million in an equity offering and may get another $800 million over the next 10 months, as the struggling retailer tries to avoid bankruptcy.

Hudson Bay Capital Management is the lead investor in the share sale, two people familiar with the matter told Reuters on Tuesday before the offering closed.

Bed Bath, which first raised the prospect of bankruptcy early last month, said on Monday it planned to raise roughly $1 billion in a complex deal where it offered preferred stock and warrants.

Analysts said the new cash may afford Bed Bath only a few quarters to revive its business, and a weakening economy would diminish any chance of a successful turnaround.

The offering "may be a Band-Aid but I'm not certain of all the makeup of their balance sheet," said Robert Gilliland, managing director at Concenture Wealth Management. "The problem is that they're probably not going to be a big turnaround story."

Bed Bath declined to comment on Hudson Bay Capital's role in the share sale. Hudson Bay did not respond to a request for comment. Bloomberg News first reported the Hudson Bay Capital development.

Hudson Bay Capital is unrelated to Canadian department store chain Hudson's Bay Co.

In a letter to suppliers seen by Reuters, Bed Bath Chief Executive Sue Gove tried to assuage concerns, saying she expected the stock sale to "catalyze our efforts to turnaround the company." She asked for vendor support and promised "open dialogue."

"We also expect it to enable strategic initiatives in fiscal 2023, providing the resources and the needed runway" to continue to execute its transformation, she said.

Bed Bath's vendors are worried and have communicated little to the company, which has been delaying or halting payments, two vendors previously told Reuters.

"All is on hold," a maker of children's apparel said last week, adding that it had stopped shipping products to Bed Bath since early January. A personal care products maker said that payments were "massively delayed."

Bed Bath did not immediately respond to a request for comment on the memo or what vendors said.
Reuters reported late last month that Bed Bath had lined up liquidators to close additional stores unless a last-minute buyer emerged.

Prices on Bed Bath & Beyond bonds due in 2024 climbed on Tuesday to 24 cents on the dollar from about 5 cents a day earlier, but still reflect financial distress.

Meme stock

Bed Bath shares rose 3% in extended trading, after closing down 49% on Tuesday.

"It just looks like a way of extending time in the hopes someone rescues them but that looks a bit unlikely," said Chris Beauchamp, chief market analyst at IG.

"Having been on the edge of the meme stock frenzy, it's not surprising that this news has poked the embers of that particular mania," he added.

A part of the meme stock phenomenon, Bed Bath saw its shares surge as high as $30 last year, when activist investor Ryan Cohen took a stake in the company and pushed for changes.

Other meme stocks that have been pumped up by retail investors in the past few years include AMC Entertainment and video game retailer GameStop Corp, which closed down a respective 9% and 11% on Tuesday.

"The popularity of meme stocks could ebb and flow depending on the market's mood (but investors) just have to be careful about it, especially in a high-rate environment," said Callie Cox, U.S. investment analyst at eToro.

In a regulatory filing, Bed Bath said recent volatility and current prices "reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know if or how long these dynamics will last."