Bed Bath & Beyond would have used a bankrupt law firm

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Shares of Bed Bath & Beyond fell 16% on Monday after the struggling retailer reportedly hired a top law firm known for its work in bankruptcy restructurings.

The Union, N.J.-based home goods chain has hired Kirkland & Ellis and is behind on payments to suppliers, leading some to restrict shipments or halt them altogether, according to a report from Bloomberg.

“If the company does not obtain adequate financing to appease its supplier base, it may not have adequate inventory for the key holiday period, causing a rapid downward spiral and creating the risk of bankruptcy,” according to a note from Wedbush analyst Seth Basham.

A cascade of bad news for the retailer was set off last week when billionaire investor Ryan Cohen exited his stake in Bed Bath & Beyond, making a profit of $68.1 million. Shares of Bed Bath & Beyond fell 41% on Friday after news broke that the stake was being sold by Cohen, an influential investor among the Reddit crowd who founded Chewy.com and is also chairman of the video game retailer. GameStop.

Shares of Bed Bath & Beyond closed at $9.24, down $1.79.

It’s unclear what prompted Cohen to sell his position in the company, which forced its CEO to step down in June due to the company’s lackluster performance. Cohen successfully lobbied for the company to add three new directors to the board and also urged the retailer to sell itself.

Cohen bought more than 7 million shares of Bed Bath & Beyond earlier this year.

Billionaire investor Ryan Cohen has withdrawn his stake from Bed Bath & Beyond.
Bill Jerome via Flickr

There are fears that the company does not have enough cash and that suppliers are demanding upfront payment before shipping goods from the struggling retailer.

A potential lifeline for the retailer is to sell Buybuy Baby, which it acquired in 2007 for $67 million. Acting CEO Sue Gove said in a June call with analysts that the company was still considering selling the division, according to a CNBC report.

“Selling BABY might give the business ample time to right its ship and ease supplier concerns,” Basham wrote in the note, adding, “but it does not fundamentally change the negative outlook for the core business, which burns money and loses resonance with customers.”

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