bbby

Meme Stonks: $BBBY

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BusinessPsychologyUS & World

The meme stonks are back and this time led by retailer Bed, Bath and Beyond. Companies like $BBBY, $GME and $AMC have questionable underlying financials making the moves of these stocks very confusing for many. CNBC will tell you it is retail making uninformed trades based off of memes and reddit pages. While this take is not false, there is actually some quality to these plays, that result in these incredible short squeezes. 

Last week the meme stock saga continued as CEO of GameStop and chairman of BBBY sold his entire stake in BBBY following a run of the stonk from $4 to $30. The stock has since taken a nose dive and many are saying BBBY is headed for chapter 11. Here we will discuss why it maybe time to buy the fear.  

 
A lot of hopium and FUD going around I’m trying to stick with numbers and facts. 
 

The trade thesis for BBBY was always to play a monster short squeeze. Has that trade come and passed? Maybe. From here the trade becomes very binary for me. All or nothing. Either RC and BBBY has figured out some sort of financial agreement or bankruptcy. That’s what we will find out in the next 13 days. This time frame aligns with the coming BBBY announcement that they have reached some sort of financial restructuring deal. Chapter 11 or some sort of acquisition are the stakes.

Reddit has strangely been able to blow up short sellers by persuading retail to HODL. Threads like The Everything Squeeze are popular among Wallstreetbets crowd, whether the information presented is factual is up for debate. 

 
Facts are this stock is still HEAVILY shorted. The RegSho listing is solid evidence that there are shares outstanding and institutions need to buy back shares even after RC sell off. According to Ortex the utilization rate has been close to 100% even after RC sell off. In terms of trading a short squeeze technically all the indicators are here. Option chain volume is still heavy in favor of OTM calls even after RC sell. The stock is down 75% in two days. Shorts doubled/tripled down. This could be the best buying chance to get in on an over extended short and squeeze it to the moon. So I see the opportunity for there to be a squeeze which is why I’m making this play. 
 
Why I’m doubling down is because BBBY and RC ventures have a debt restructuring deal done. All of the info is out there no need to make any stretches. By the letter sent by RC in March to BBBY board he wants to buy BABY. Whether it’s a spin off or GMERICA buys it I believe a deal is in place. Why do I believe this?
 
Because RC is going to jail if BBBY announces bankruptcy. I find it highly unlikely a billionaire would risk going to jail over a $62 million dollar trade? The story was framed to make it seem like RC had abandoned BBBY. If this is what has happened I will lose the entire trade and RC is going to prison. 
 
Thursday and Friday after hours there were two big news stories that drove the price down heavily. Thursday was RC sell. Friday was that creditors were halting payments to BBBY suppliers. I don’t think there is any worse news that can shake investors to sell if they haven’t sold already. I’m very surprised the stock is at high $9. I think shorts are running out of shares to short. 
I think bankruptcy chances are low. Main reason for that being why didn’t BBBY perform a stock offering? If it was on the verge of bankruptcy and need some liquidity to better it’s restructuring agreement the board would almost have it issue an offering.  
 
No offering means there needs to be another financing option in play. That being with RC ventures just like BBBY told us this week. 
 
If there is any news by the end of the month that isn’t BBBY is filing chapter 11 I think this thing can squeeze like GME did Jan 21. 

 

This is not financial advice. 

 

UPDATE: 

While writing this the WSJ has confirmed that $BBBY has a deal in place with a lender. The exact details of this deal are not yet disclosed. 

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