Bed Bath & Beyond's stock price has been on a wild ride over the last month, increasing 262% as the retailer prepares for bankruptcy. On Monday, the stock gained 92%, closing at $5.86 per share, due to short selling. Short sellers are investors who borrow shares in anticipation of the price falling, with the aim of buying the security at a lower price and making a profit. If the stock rises, they must buy shares at a higher price to close the position, which can drive prices even higher.
Data from S3 Partners shows that short interest on Bed Bath & Beyond now stands at 53% of the float. The company is in the process of closing additional stores unless a buyer can make an offer, which includes 87 Bed Bath & Beyond stores, five buybuy BABY stores, and the health and beauty discount chain Harmon. Bed Bath & Beyond is also negotiating a loan with the investment firm Sixth Street to help navigate bankruptcy proceedings.
The company's latest quarterly earnings report showed a 33% drop in net sales, primarily due to a 32% decline in comparable sales and a 70% drop in customer traffic. Over the last five days of short selling, the stock has risen 113%.
Wall Street traders have seen an opportunity in Bed Bath & Beyond's looming bankruptcy, and have been taking advantage of the stock's volatility. With short selling driving up the prices and the company seeking to secure a loan for bankruptcy proceedings, the future of the retailer is uncertain.