BBBY and the middle game
The time has come as predicted by u/0net
Boy has it been a wild ride down and back up again. Lets recap where we left off.
My last post was this one back when our boy initially made the entry :
Cohen wrote a letter to BBBY about selling or spinning off its buy buy baby business. At the time Cohen evaluated this business is worth billions of dollars:https://s.wsj.net/public/resources/documents/bbbletter030622.pdf
The entire thesis on this play is that BBBY is not going bankrupt but instead quite the opposite is taking shape. Thus making BBBY a deep value play as all they have to do is solve their expenses and they can do this several ways including a sell off or spin off of buy buy baby.
I personally am leaning towards the spinoff idea and you can read a very in depth overview here:
But the spark notes is that when a spin off occurs, the owners of shares in the parent company are given these shares in the spinoff proportionate to what they own. Considering Buy Buy Baby would have a stand alone market cap of "several billion dollars". This is justified as the trailing 12 month revenue sits at 1.3B and they are growing the revenue at low double digits.
So every BBBY share is literally a golden ticket in the event of a spinoff that grants you these shares down the line if/when buy buy baby is spun off. YOU would be that person that owns the shares pre IPO for once before any hype or anything like this.
Keep in mind that BBBY is dancing around a 500M market cap. Just a 1 billion valuation (which is a very mild af valuation) for a component of the company is a easy double up without even trying let alone all the other factors we get to discuss next 🙂
You see while BBBY has been in the dumpster, it has quietly been building a massive ramp in the options to Cohens strikes. Simply take a look at these:
18k plus contracts ITM
10k contracts ITM with another 30k contracts ITM if it gets to 10 bucks by Aug 19
Now heres the really impressive picture:
Yes you read that correctly. 45,663 at the $10 strike alone and still have 5 months to go! 23,798 at 20 with many thousands in-between.
The classical strikes.
Cohen has strikes from 60 to 80. You can see here these are heavy numbers too. If we get to 60 it puts 35,659 just at that strike ITM and if we get to 80 well I think the great sneeze explains itself. Gonna need alot of Kleenex on this one.
These are just the options. Lets go ahead and get started in on the shares as the big boys have been taking positions while everyone else is asleep since 06/30 (right after the ugly earnings report):
I gave the last picture its own separate photo as there is some things to discuss on it.
On July 20th, essentially what appears to be a dressed up WSB user with some fancy quant knowledge offered BBBY an option to restructure its debt via bonds by injecting a billion in cash and increasing the long term debt while reducing interest payments. I am personally unsure if this is good or bad but I trust whatever Cohen does or does not do here. Considering how much time has passed, its unlikely this proposal is being considered but who knows!. Here is their letter:
They did a AMA on twitter recently that was interesting. They mentioned regardless of accepting the proposal they are going to hold anyway. Why wouldn't they? They know its a 10 bagger plus too.
You can see all the shares trading hands here:
Did the math and there is a net positive of 5,817,699 shares purchased by funds sine 06/30. Who knows who has bought more of BBBY since 06/30. Quite clearly ALOT of buying is still going on as everyone knows a company that does revenues of 7B a year is a value buy at a 500M market cap.
Unfortunately for most people there is a big problem BBBY is facing. Its shares are sadly going extinct!
According to the statistics here, there's a float of 69.45M and outstanding of 79.96M
At face value considering the recent whale wisdom data and RC, you have 5,817,699 shares and RC alone has 9,450,100. So there is a combined 15,267,799 just looking at 06/30 and including RC.
Including the shares short of 28.56M this would equate to 43,827,799. But heres where it gets even more wild:
If you total up the top holdings disregarding the calls/puts you get 71,360,716 shares currently held by the whales.
So you tell me how we have 71,360,716 shares tied up by longs on 79.96M shares outstanding. Let alone if we include the short position then you would have 71,360,716+ 24,620,000 shares short = 95,980,716 shares being tied up.
Now I don't know who exactly fell asleep at the wheel here but the share scarcity is real. Its so real that invisible shares must exist and the funds who are bearish are basically playing a hybrid game of Russian Roulette and chicken with each other on who is going to roll over on who first. You can even see here there is hardly any shares available compared to what normally is available:
Yesterday at close there was only 200 shares!
Lets cover some logic here. BBBY is a 500M company according to the market.
Q1 2022: 1.46B in revenue
Q4 2021: 2.05B in revenue
Q3 2021: 1.88B in revenue
Q2 2021: 1.98B in revenue
So the trailing 12 months of revenue here is 7.37B in revenue according to markets = 500M market cap…I'll let ya'll work out how to justify that low valuation.
The last thing to look at here is that Tritton is gone. He was ousted in June and the board was replaced being downsized to 10 member forwhich 3 are RC's own people.
The company has been doing everything Cohen is asking of them. Not giving guidance on earnings calls, moving inventory out into the market space and creating value in buy buy baby with partnerships.
Bed Bath is already a Kroger partner:
They just partnered with Loverly for registries:
Partnered with Primary:
In fact BBBY is getting so aggressive that they dont even gaf if you have a baby or not, they finna knock on your door and sell to you regardless:
If you know anything about Karen's, they are perfect for publicity and good sales people obtain opinions from everyone instead of being scared to get rejected. Seeing this type of aggressive marketing is incredibly bullish as BBBY is out to move this inventory regardless.
Ok the very last thing is the shareholders meeting July 14. Here is what specifically was said (no transcript exists but I did one myself):
At the 18 min mark:
Before I turn the call over to Suzie for questions I want to reiterate my belief in our ability to drive improvement and my optimism in the future for our company.
We look forward to updating you on our continued progress by the end of next month
Q: What are your plans for buy buy baby? Do you intend to keep and grow it? Spin it off as a separate company or sell it?
A: Thank you Suzie this is Harriett. The strategy committee of our board has done a great deal of work evaluating the potential of our buy buy baby business.
The analysis to date has confirmed and dimensionalzed the attractiveness of buy buy baby and identified several options for this business. The committee is working closely with the board and both strategic and financial advisors to properly assess value potential.
Once a specific path is determined. The board will consider all shareholder and capital implications, discuss it with management and our advisors and update you when the work is complete.
Q: In a buy buy baby spinoff would you consider distributing a portion of the companies shares to BBBY shareholders as a dividend?"
Well as I mentioned first we have to determine a specific path and then the board will consider all options before it and uh again look forward to an update in the future.
BBBY ousted the CEO, created a new board controlled and being obeyed by Cohen. The shares are becoming an endangered species as there appears to be more in play than officially exist and history tends to repeat itself. 7.37B in sales at a 500M market cap. 5M plus shares bought by funds since just 06/30 and tens of thousands if not hundreds of thousands of options open interest are creating a massive ramp as the stock appreciates. Buy Buy Baby could be spun off to existing shareholders that will be distributed making your shares golden tickets to free buy buy baby shares before it would be publicly traded. BBBY is done playing around and is getting aggressive af even getting Karen's nice and angry while creating numerous partnerships to increase its own inherent value of several billion dollars doing 1.3B in sales on its own in the trailing 12 months ending 03/31 (Q2 2021-Q1 2022).
Multiple Catalysts exist. RC buying more shares (remember when Cohen bought more GME 4 months after their initial buy before the sneeze?). Another whale buying more shares. Spinning off Buy Buy Baby, selling Buy Buy Baby, forging new partnerships with Buy Buy Baby. Restructuring the debt, moving all the backlogged inventory that has built up successfully. Oh and theres literally an update of some sort coming sometime this month. Whatever could it be!?
Submitted August 04, 2022 at 10:46PM by snippythehorses