[adam_arthur]

They didn't sell nearly enough shares.

They could have probably saved their business, at least in the short term, by selling more. Their shares outstanding barely increased even as the price rocketed unjustifiably higher on meme energy. I'm consistently amazed by the poor management by CFOs of companies not selling shares when their P/E or even P/S multiples are 100x+.

This is 100% free and exploitable money available to businesses, that quite clearly won't last into perpetuity. NVDA should be selling 10%+ of their share count into the market at this price. You can buyback the shares later when the price will, inevitably, and quite obviously materially fall. You could immediately put the money into a MMF yielding 5% rather than the current 1% earnings yield. There's just obvious, no brainer stuff here for many CFOs to take advantage of.

Looks like BBBY share count has declined materially over the past decade, which was quite surprising. Goes to show that buybacks mean nothing for shareholder returns until you sell. And the buyback itself is a disposal of cash on hand (or accrual of debt), so is price-neutral in the immediate term. Who wants to bet that BBBY would rather have the cash right about now?

https://www.macrotrends.net/stocks/charts/BBBY/bed-bath-beyo...

[lbwtaylor]

> They didn't sell nearly enough shares.

This doesn't seem to be right. From Matt Levine:

>On Jan. 20, Bed Bath & Beyond Inc. had about 117.3 million shares of common stock outstanding; the stock closed that day at $3.35 per share. On March 27, it had about 428.1 million shares outstanding, at $0.7881 each. On April 10, it had 558.7 million shares outstanding, at $0.2961 each. Yesterday, April 23, when it filed for bankruptcy, it had 739,056,836 shares outstanding. 1 The stock closed at $0.2935 on Friday.

https://archive.is/PXnpB

Seems like they sold as much as possible, enough to crater the stock, but not save the company.

[adam_arthur]

Yes, they waited until the share price was close to 0 to start selling rather than when it spiked to 20. Note the dates in what you quoted versus their stock chart.

If they had actually sold earlier when the stock was largely mispriced to the upside, they may have been able to turn it around. Good capital management is raising money when you dont need it in preparation for time that you do… not panic selling as your stock is already on the verge of bankruptcy.

My commentary was exactly that. That companies should raise when their stock is fundamentally overvalued. There are hundreds of companies out there that sure wished they had raised in 2021. Many of them are likely to follow in BBBY’s footsteps

Really poor execution by CFOs across the board. I think a combination of being overly optimistic, plus personal incentives against lowering the share price in the short term (Stock based comp, board may be short term oriented and decide to fire you, etc).

[graeme]

Companies will not find unlimited liquidity at given share prices.

[FormerBandmate]

It takes a lot of time to authorize share sales. When you do that it tanks the stock. AMC tried to at $80 and got voted down so had to go through several hoops which caused massive declines.

Elon Musk is one of the only people who's ever made it work, and his sales of Tesla stock are largely responsible for its current success

[adam_arthur]

You can authorize future share sales well ahead so that you're already prepared. Many companies have consistent authorization to sell into the market when they feel timing is right. It's a common way that BDCs and REITs grow. If the stock is trading well above NAV, selling shares is accretive to shareholders. Buybacks above NAV/fair value are dilutive (which clearly was the case with BBBY)

You can also sell in blocks to private acquirers if anybody bites. But the first approach is better if it's a meme situation (no rational buyer would take a block of shares close to market). Clearly there are many companies that could have and likely still can sell large blocks of shares close to market, NVDA being one example.

"A shelf offering allows a company to register its securities with the SEC but then delay putting them on the market for a period of up to three years. This provides some advantages, as the company can time the release of its securities, ideally aligning the issuance with favorable market conditions. Shelf offerings can also help companies save on the registration process, as they do not have to re-register each time that they release new shares."

from Investopedia

Somehow people confused this all along the way and simply equated "buybacks = good". Its about what value you get for the shares you're buying/selling. That's it. Buying back your shares at a 30x+ earnings multiple is going to be a terrible allocation of capital for most companies in the long run