BBBY: Stock Buybacks at 0 terminal value

Part of the Portfolio since 2023... (hat tip Walter!)

Bed Bath & Beyond was, for a generation of Americans, a genuinely beloved shop: the cavernous home-goods barn with the wall-to-wall towels and, above all, the legendary big blue 20%-off coupons that households hoarded in kitchen drawers and treated as a kind of parallel currency.

Its slow decline was, at first, utterly ordinary – Amazon, Target, too many leases, and a self-inflicted pivot to private-label brands that chased away the very shoppers who came for the brands they knew.

An ordinary retail death would not earn a place here. What earns it is the ending, in which a dying retailer was reanimated as a meme-stock casino and then drained in full view of its own most loyal fans.

In 2022, Ryan Cohen – the activist investor adored by the online retail crowd – took a roughly 9.8% stake through his RC Ventures, posted some cryptic, crowd-pleasing signals, and watched the share price levitate on retail enthusiasm. Then, in August 2022, he sold the entire position, reportedly netting around $68 million as the stock collapsed some 40 per cent on the news of his exit. The crowd that had followed him in was left holding the bags he had just put down.

The company, desperate for cash, then did the thing dying companies do: it issued new shares into the mania, raising money by diluting the very meme-buyers who had bid the price up. It is a grim machine – retail enthusiasm inflates the share, the company sells that share to fund a few more months, the price sinks, repeat – and it transfers money from the hopeful to the merely solvent with great efficiency.

Amid this, in September 2022, the company’s chief financial officer, Gustavo Arnal – who had days earlier been named in a fraud lawsuit alongside Cohen – died after a fall from a Manhattan building. It was a genuinely dark moment in what the market had been treating as entertainment, and a reminder that behind the memes sat real people under real pressure.

The arithmetic finished the story. In April 2023 Bed Bath & Beyond filed for Chapter 11 bankruptcy, and the equity was wiped to zero. The towels were liquidated; the coupons, poignantly, were honoured for a final brief window; the shares were worth nothing at all.