Bed Bath & Beyond officially files for Chapter 11 bankruptcy over the weekend. This is hardly a surprise. They defaulted on their debt back in January. What puzzles me is this stock was worthless when I wrote about them back in August last year. Yet, some investors seemed unfettered and BBBY 0.00%↑ stock was trading at ~$2.5 AFTER the defaulting news. The stock finally came down to $0.29 at Friday’s close. I don’t understand this self-sabotaging behavior of investors. It was almost certain that they were going bankrupt last August but investors were buying the stock at a ~$3B valuation and earlier this year at a ~$1B valuation. Let me copy and paste what I wrote last August:
There are tons of discussions on /r/wallstreetbets about $BBBY. People seem to be very bullish and the trading volume went from 11.46 million shares on 8/1 to the peak of 395 million shares on 8/16. I couldn’t really find a very good reason why people like this stock. The company has a negative book value, is bleeding hundreds of millions of dollars a year and only has ~$100 million dollars of cash at hand. It seems kind of silly to YOLO into this stock. They can go bankrupt anytime and equity holders would be wiped out. Based on the trading volume, it appears that many retail investors bought the stock in the past week at the peak. This is basically gambling. If people want to gamble, perhaps they should go to Vegas instead. At least they would get some entertainment value out of it.
Investors can be incredibly foolish and take chances with 100% probability of loss. One thing I learned from 20 years of investing is that people are irrational and the market prices are never efficient. Bed Bath & Beyond is just another example of extremely foolish investor behavior.