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Bed Bath & Beyond Inc. said Monday it had received several inquires from shareholders related to naked short selling but that it had no specific access to information on share lending for short-selling transactions.
“While the company is unable to confirm such activity, the company denounces any market manipulation of its stock
BBBY,
” the troubled home-goods retailer said in a statement.
In regular short trading, an investor borrows shares from someone else, then sells them and waits for the stock price to fall. When that happens, the shares are bought more cheaply and returned to the previous owner, with the short seller pocketing the difference as profit.
In naked short selling, investors don’t bother borrowing the stock first and simply sell shares with a promise to deliver them at a later date. When that promise is not fulfilled, it’s known as failure to deliver. The issue has been in the headlines in recent months as a group of mostly penny-stock companies has complained about the activity and hired advisers to help get the attention of regulators.
For more, see: Genius Group CEO on why his company is fighting back against naked short sellers — and it’s not alone
The issue is controversial, with some investors claiming that naked short selling does not really happen but is used by executives to explain sharp moves in their stocks.
From the archive: Short sellers are not evil, but they are misunderstood
The Bed Bath & Beyond statement was issued to update shareholders on the company’s plan to hold a special meeting for a vote on a proposal to conduct a reverse stock split. The sometime meme-stock company said that the meeting will be held on May 9 and that shareholders who owned about 428 million shares that were outstanding as of March 27 are eligible to vote.
“We understand the choices we have had to make to improve our liquidity have led to speculation both about our business and our stock,” CEO Sue Gove said in the statement. “We are taking the necessary steps as part of our financial strategy to sustain and grow our business.”
It has been a tumultuous few months for the retailer, which announced an equity offering earlier this year in an attempt to stave off bankruptcy. That came after a troubled couple of years marked by strategic missteps, cash burn, challenging underlying business trends and the impact of the COVID-19 pandemic. In March, the company gave a sales warning, sending its stock to a then record low.
Related: Bed Bath & Beyond has launched a ‘Hail Mary pass’ with latest partnership, says retail expert
The stock, meanwhile, fell to fresh lows on Monday and was last trading at 29 cents, down 5% from Thursday’s record-low closing level of 31 cents.
The stock has now fallen 98.5% in the last 12 months.
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