Bed Bath & Beyond Preparing for Bankruptcy Filing Within Days

earth_imperator said:
ATTN: option holders will have a total loss if the shaet no longer trades....
More...
Hmm. is that true? It seems not: Put options win big in such bankruptcy cases:

https://optiontradingpedia.com/what_happens_to_options_during_bankruptcy.htm
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WHAT HAPPENS TO CALL OPTIONS DURING BANKRUPTCY?
When a company declares and files for bankruptcy and you are holding call options, the shares drop and your call options simply expires worthless when the underlying stock hits rock bottom. In fact, it is the same as having the stock drop enough to put those call options out of the money upon expiration.


WHAT HAPPENS TO PUT OPTIONS DURING BANKRUPTCY?
If you own put options on stocks of a company that has just declared or filed for bankruptcy, you are in for a huge reward. The delivery and settlement of every stock option is guaranteed by the OCC, Options Clearing Corporation, in the US Market. Whoever sold you that right to sell shares of that company at that higher price is obliged to fulfill that obligation, so your profit is guaranteed. The only question is, what happens when that company files for bankruptcy and trading in its stocks and options are suspended? When that happens, trading of that company's stocks and options moves to the Over The Counter (OTC) market or what is known as "Pink Sheet" market where you are able to either sell those put options for a profit or exercise the options and sell the stocks for the same profit. Since it is the company that is going illquid and insolvent and not the person or institution who sold you those put options, you are guaranteed your profit and delivery.

The most recent example of this are put options on the collasped Lehman Brothers (ex-Ticker : LEH) which filed for bankruptcy on 14 Sep 2008. After filing for bankruptcy, Lehman Brothers' shares moved from the exchange to the OTC market (Ticker Symbol LEHMQ or LEHMQ.PK) where it traded at $0.05 per share on 18 Sep 2008. That is when put option holders can choose to exercise the put options by buying the shares at $0.05 and selling it at the strike price for a big profit.
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Who could have seen this coming?

“…But Bed Bath did have one thing going for it. It was “part of the ‘meme-stock’ movement started and fueled on Reddit boards and social media websites,” because it “checked the two boxes needed to become a meme-stock: (i) a troubled financial situation and (ii) nostalgia value.” 2
  • So someone had the bright idea of delaying things for a bit by selling tons and tons of stock to Bed Bath’s retail shareholders at whatever prices they’d pay. “Certain third-party investors expressed interest in providing the Debtors with substantial equity financing in light of the Company’s depressed share price and continued trading volatility. More specifically, the Debtors were approached by Hudson Bay Capital Management, LP” about a weird stock deal that we discussed in January; this ended up raising about $360 million. After the Hudson Bay deal ran its course — basically, after Hudson Bay and Bed Bath drove the stock price from above $3 to below $1 by pounding out about 311 million shares to retail investors — Bed Bath and its brokers at B. Riley Securities Inc. sold another 311 million shares to retail investors, but at ever-declining prices, so they raised a lot less money. Still something, though…”




  • All of the legal documents were pretty clear that Bed Bath was raising money by selling stock to retail investors, that it was handing that money directly to its creditors, that the money probably wouldn’t be enough, that Bed Bath was probably going bankrupt, and that when it did the stock that it had just sold to those retail investors would be worthless. And things have worked out exactly as promised. No one can be surprised!

    And yet it is one of the most astonishing corporate finance transactions I’ve ever seen?[4] The basic rules of bankruptcy are:

    When a company is bankrupt, the shareholders get zero dollars back, and the creditors get whatever’s left.

    The shareholders don’t get less than zero. They don’t put more money in.[5]



  • https://www.bloomberg.com/opinion/a...-the-beyond#xj4y7vzkg?leadSource=uverify wall

 
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Year of Birth: 1992
Year of Death: 2023

Age: 31

RIP BBBY

FONDLY REMEMBERED

PSALMS 23 - THE LORD IS MY SHEPHERD

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