After the market closed yesterday the entire board of directors of Bed Bath & Beyond (BBBY) got all of their restricted stock awards (RSAs) cashed out at $4.89 per share. When the market closed this afternoon Bed Bath & Beyond was trading at $3.39 per share. There wasn’t a press release of the cash out. There were just Form 4s filed for the entire board filed by “power of attorney”.

This is a strange thing to see. My first sense is you can’t cash out an entire board of directors and then let the equity go to zero. That would look extremely bad in bankruptcy court.

Which leads to the second alternative, is there a buyout coming? A lot of people on Twitter seem to think so…

Inflation Tracker @TrackInflation

So the entire board of $BBBY just had all their RSAs bought out for a cash purchase price of $4.89 per share. The stock is trading at $3.39 per share. You can't buy out the boards RSAs, especially for a premium and then file for bankruptcy, can you? Buyout on the horizon?

4:04 AM ∙ Jan 25, 2023

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Tendie Baron @TendieBaron

$BBBY entire team of directors (except CEO) got their shares vested 6 months early... I wonder why a company would pay out yet-to-be-vested early in a bankruptcy scenario (or at all?!?). This wouldn't make sense in a bankruptcy scenario... CHANGE IN CONTROL incoming?🤭

2:08 AM ∙ Jan 25, 2023

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0xMattt.eth @0x_Mattt

$BBBY interesting take on the restricted stock cash buyouts that dropped today. 🚀

5:53 AM ∙ Jan 25, 2023

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On the other hand if there was a buyout coming I don’t see why you would cash out the board of directors. Because if Bed Bath & Beyond is getting bought out at $4.89 per share then just let the RSAs convert at the time of the buyout, not from the company’s cash balance prior to the bankruptcy.

My best sense is Bed Bath & Beyond is preparing for bankruptcy. They are cashing out the board of directors with hopes the creditors won’t notice the small amount of cash the company handed out to the board.

Yes, there probably is a change of control coming. But that change of control will go from the equity owners to the creditors. The board has not been the best at maximizing the fiduciary duty for shareholders. They let Bed Bath & Beyond fail.

I’ve been around public markets enough to know that dirty things happen. It doesn’t make sense to cash out the board right before you file for bankruptcy. Individuals do dirty things in public markets and ALWAYS try to maximize their own value before others.

I could be wrong here. A buyout could happen. But it won’t be above the $4.89/share price the board was cashed out at. Which only gives investors a 44% upside from yesterday’s closing price. A 44% upside compared to a 100% downside is not a great risk/reward. If you ever have 100% downside in an equity you are invested in, the upside should be multiples of that. This risk/reward is terrible here. I would stay away.