By Deborah Mary Sophia and Medha Singh
(Reuters) -Shares of retail investor favorite Bed Bath & Beyond Inc nearly halved in value on Tuesday after the troubled home goods chain's plans to raise about $1 billion through an offering failed to convince investors the company could fend off bankruptcy.
The additional cash would offer the retailer a short window of only a few quarters to revive the business, Wall Street analysts said, adding that a weakening economy would diminish any chance of a successful turnaround.
"It just looks like a way of extending time in the hopes someone rescues them, but that looks a bit unlikely," said Chris Beauchamp, chief market analyst at IG.
"Having been on the edge of the meme stock frenzy, it's not surprising that this news has poked the embers of that particular mania."
The stock was the most actively traded across U.S. exchanges, with the turnover crossing $506 million at 12:18 p.m. ET and the market value set to shrink to $370 million if losses hold through the session.
Reuters reported late last month Bed Bath & Beyond was preparing to seek bankruptcy protection and had lined up liquidators to close additional stores unless a last-minute buyer emerged.
The company said it expects to receive gross proceeds of about $225 million from the offering initially and an additional $800 million through subsequent installments.
Bloomberg News reported on Tuesday Hudson Bay Capital Management was the anchor investor of the share sale, citing people with knowledge of the matter.
Bed Bath & Beyond and Hudson Bay did not immediately respond to a Reuters request for comment.
The offering "maybe a band-aid but I'm not certain of all the makeup of their balance sheet. The problem is that they're probably not going to be a big turn around story," said Robert Gilliland, managing director at Concenture Wealth Management.
Bed Bath & Beyond's shares were trading at $3.14 on Tuesday and among the most discussed on stockstwits.com.
They closed more than 92% higher on Monday on strong retail interest. It was the most traded stock on Fidelity's customer platform, with about 60% buy orders versus 40% sell.
A part of the meme stock phenomenon, Bed Bath & Beyond's shares surged to as high as $30 last year when activist investor Ryan Cohen took a stake in the company and pushed for changes.
Other meme stocks that were pumped up this year include AMC Entertainment, car seller Carvana Co and video game retailer GameStop Corp, which fell between 2.5% and 12% on Tuesday.
"We believe that recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know if or how long these dynamics will last," Bed Bath & Beyond said in regulatory filing.
"The popularity of meme stocks could ebb and flow depending on the market's mood (but investors) just have to be careful about it, especially in a high-rate environment," said Callie Cox, U.S. investment analyst at eToro.
(Reporting by Deborah Sophia, Amruta Khandekar, Ankika Biswas and Medha Singh in Bengaluru; Additional reporting by Sruthi Shankar, Lance Tupper and John McCrank; Editing by Shinjini Ganguli)
