Bed Bath & Beyond Inc. (NASDAQ: BBBY) filed a proxy statement last Wednesday, announcing a special shareholders’ meeting on May 9 to vote on a proposed reverse stock split. The retailer said the exchange would be one new share for between 10 and 20 existing shares of common stock.

The company indicated in its filing that it “needs to raise equity capital to have the necessary cash resources to fund operations and service obligations” under the terms of its August 2021 credit agreement. Last month, Bed Bath & Beyond agreed to allow B. Riley to sell up to $300 million in common stock and, in a separate agreement, retained the right to sell $1 billion in common stock or authorize an exchange cap to an affiliate of B. Riley.

Bed Bath & Beyond does not have enough authorized shares of common stock to meet the terms of its agreement with B. Riley. According to a statement of additional proxy information filed Monday, the company said it had 426.1 million shares outstanding as of March 27, the record date for shareholders eligible to vote at the special May 9 shareholders’ meeting.

At Thursday’s closing price of about $0.31 per share, the outstanding shares have a value of about $132.7 million. Boosting the share price by a factor of 10 would do the trick. A reverse split of more than 10 existing shares for one new share would leave the company with some breathing room to raise more capital.

Based on its historical record, Bed Bath & Beyond would be expected to report quarterly earnings this week. So far, however, there has been no announcement of a release date for the company’s fourth quarter. Unless the company files for an extension, it should report earnings this week.

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Over the past 12 months, its share price has fallen by more than 98%. Despite it trading an average of more than 80 million shares a day, just 10 brokerages cover the stock. Of those, three have a Hold rating and the other seven have Sell or Strong Sell ratings. With a median price target of $1.25, the implied upside based on the current price is about 77%. The high price target of $4.00 implies an upside of nearly 1,300%. If shareholders approve a 10-for-1 reverse split, the upside would drop to around 25%, based on the high price target.

Fiscal 2023 fourth-quarter revenue is forecast at $1.2 billion, which would be down 4.6% sequentially and by 41.5% year over year. The adjusted loss per share is tabbed at $1.77, more than 50% better than the prior quarter’s loss of $3.65 per share but nearly twice as large as the prior year’s quarterly loss of $0.92 per share. For the full fiscal year that ended in February, Bed Bath & Beyond is expected to report a loss per share of $10.86, compared to a 2022 fiscal year loss per share of $1.08. Full-year revenue is pegged at $5.36 billion, down nearly 32%.

Bed Bath & Beyond does not pay a dividend and is not expected to post a profit until fiscal 2027.

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