Morning Reads

Morning Reads

Todays Open Interest Change




Bed Bath & Bankruptcy

Long-struggling retailer Bed Bath & Beyond (NASDAQ:BBBY) has filed for Chapter 11 bankruptcy protection, but said it intends to keep the chain’s 480 stores open for the moment as it attempts to auction off assets through the restructuring process. That includes 360 Bed Bath shops and 120 buybuy Baby locations. In the meantime, the company has secured a commitment for some $240M in debtor-in-possession financing from Sixth Street Specialty Lending Inc., listing $5.2B of debts and $4.4B of assets in its bankruptcy filing.

Backdrop: The first Bed ‘n Bath store opened in 1971, but the firm went public under the BBBY ticker in 1992 and eventually added buybuy Baby, Cost Plus World Market, Christmas Tree Shops and other chains. At its peak, the company operated more than 1,500 U.S. and Canadian locations. Missing the boat on the internet, the firm began to falter in 2019, posting its first-ever annual loss even as activist investors began a push to remove then-CEO Steven Temares and restructure BBBY’s board. Store closures accelerated in 2020 during the COVID-19 pandemic, and Bed Bath began scaling back the use of the ubiquitous 20%-off coupons that it had regularly been mailing to millions of U.S. households.

"Customers have trusted us through the most important milestones in their lives - from going to college to getting married, settling into a new home to having a baby," CEO Sue Gove said in a company statement. "We deeply appreciate our associates, customers, partners and the communities we serve, and we remain steadfastly determined to serve them throughout this process. We will continue working diligently to maximize value for the benefit of all stakeholders."

Possible failure: By early this year, the company issued a “going concern” statement, warning that management had “substantial doubt” the firm could remain in business without a restructuring or asset sale. However, Bed Bath & Beyond enjoyed several brief, double-digit percentage rallies since then, as some speculators bet that the firm could survive and several meme rallies took hold. Shares even soared in percentage terms as recently as this past week after BBBY sold $48.5M of new stock.

What's next? BBBY’s share price - which topped $80 intraday in 2014 - fell to as low as $0.23 earlier this month, and is now down 40% to $0.18 in premarket trading. "Some remnants may survive, but they will likely be small and will leave common shareholders wiped out," writes Investing Groups Leader Daniel Jones in SA article "The Last Nail In The Coffin." Contributor WYCO Researcher also explores why Bed Bath had to file for bankruptcy now, while Henrik Alex tells investors to move on given the absolute priority rule. (162 comments)

Survey Monday

Big Tech is set to highlight a busy earnings week, especially given the sector's outsized influence on broader market gains so far in 2023. Which of the following stocks will be the biggest gainer in the session following earnings? (Note that Apple reports next week)

· Alphabet (+18% YTD)
· Amazon (+25% YTD)
· Apple (+32% YTD)
· Meta (+71% YTD)
· Microsoft (+19% YTD)

Take the survey and see the results here

Playing with debt

An unprecedented dislocation between short Treasury maturities is continuing as traders move cash away from the 3-month bill, which is likely to be most impacted by a debt ceiling fight in Washington. The spread was already the highest it's ever been, but the 3-month yield (US3M) jumped 12 basis points to 5.23% overnight, while the 1-month yield (US1M) rose 2 basis points to 3.36%, bringing the spread to 187 bps. Lower-than-expected tax revenue collections have brought forward expectations of when the U.S. could face a default question, though there's likely only a 2% chance that the U.S. defaults on its debt despite growing fearmongering. Last week, House Speaker Kevin McCarthy introduced a bill that would raise the $31.4T debt ceiling by $1.5T along with limiting federal spending, which would be enough to avert a default until at least April 2024. (7 comments)

Serious outflows

Credit Suisse (NYSE:CS) has revealed more details about what happened to the troubled bank before regulators worked out a deal for the institution to be swallowed by Swiss rival UBS (NYSE:UBS). Worries of a global banking crisis saw the lender suffer $68.6B of asset outflows in the first quarter, according to its Q1 earnings report, and while the outflows have since stabilized to much lower levels, they "had not yet reversed as of April 24, 2023." In a weird string of banking math, Credit Suisse posted a one-off $14B profit for the quarter due to the $17B writeoff of AT1 bonds in its controversial emergency rescue. Without it, the bank would have lost more than $2B. Rumor also has it that Santander (NYSE:SAN) is in talks to poach several of Credit Suisse's most senior investment bankers as SA analyst Anna Sokolidou cautions that the UBS merger is not without consequences. (11 comments)

Stuck in the mud

The S&P (SP500) (SPY) is more stuck in the mud than bulletproof, with countervailing fundamental forces split between positive and negative, Goldman Sachs’ head of global hedge fund trading said on the bank’s new podcast. Tony Pasquariello outlines those forces and why the VIX (VIX) has tumbled. SA’s head of quant, Steve Cress also dug into those issues on the Investing Experts Podcast, as well as the chances of a soft landing, and why Fastly (FSLY) is one of his top five picks for earnings season. Hear the episode and see the other stocks that get top earnings revisions grades here. (11 comments)

Today's Markets

In Asia, Japan +0.1%. Hong Kong -0.6%. China -0.8%. India +0.7%.
In Europe, at midday, London flat. Paris -0.1%. Frankfurt flat.
Futures at 6:30, Dow -0.2%. S&P -0.2%. Nasdaq -0.2%. Crude -0.2% to $77.68. Gold +0.2% to $1994.80. Bitcoin -0.8% to $27,340.
Ten-year Treasury Yield -3 bps to 3.54%

Today's Economic Calendar

8:30 Chicago Fed National Activity Index
10:30 Dallas Fed Manufacturing Survey

Companies reporting earnings today »

What else is happening...

IPO comeback? J&J (JNJ) to launch roadshow for consumer health unit.

Deeper dive: What is behind the biotech M&A resurgence?

NBCUniversal (CMCSA) CEO departs after 'inappropriate relationship.'

Boston Beer (SAM) unlikely takeover target for Heineken (OTCQX:HEINY).

EPA set to propose restrictions on power plant greenhouse gases.

Ad controversy: Bud Light (BUD) marketing exec takes leave of absence.

Is Tesla (TSLA) preparing to ship cars to North America from China? (AI) slips after being cut to underperform at Wolfe Research.

TV usage drops again, but cable gets a basketball bounce.

Apple (AAPL) said to be working on app for mental, physical health.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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