Money Rehab with Nicole Lapin - Bed Bath and Bust

Episode Date: April 26, 2023

Nicole breaks down the biggest headlines on Wall Street (so far) this week. The biggie everyone is talking about? Bed Bath and Beyond's bankruptcy. Nicole unpacks what this bankruptcy means for shareholders and the meme stock bros.

Money rehabbers, you get it. When you're trying to have it all, you end up doing a lot of juggling. You have to balance your work, your friends, and everything in between. So when it comes to your finances, the last thing you need is more juggling. That's where Bank of America steps in. With Bank of America, you can manage your banking, borrowing, and even investing all in one place. Their digital tools bring everything together under one roof, giving you a clear view of your finances whenever you need it. Plus, with Bank of America's wealth of expert guidance available at any time, you can feel confident that your

money is working as hard as you do. So why overcomplicate your money? Keep it simple with Bank of America, your one-stop shop for everything you need today and the goals you're working toward tomorrow. To get started, visit bofa.com slash newprosmedia. That's b-o-f-a dot com slash n-e-w pros p-r-o-s media. bfa.com slash newprosmedia. I'm Nicole Lapp Well, the time has come to ask, Reddit meme stock boys, who hurt you? Who made you think that it was a good move to keep buying the stock of a dying company like Bed Bath & Beyond? Are you okay? Do you need money rehab? We all know the answer to that question. But okay, look, sometimes Reddit is right, and there are thoughtful people on Reddit,

but sometimes it falls into an echo chamber confirmation bias situation ship, and it can get a little sad. In case you happen to have totally repressed 2021 or spent the whole year a little tipsy, which honestly, fine, it was not the best time. Here's a quick refresher. There's a long-standing subreddit called WallStreetBets. It was mostly dudes who made dirty jokes and questionable options plays, but occasionally they would identify a profitable company and people would make some serious money as a result. That was the exception, though, and usually those so-called bets were exactly that. Bets. And losing ones. In 2020 and in 2021, the market was in what can only be called easy mode, and during this time, lots of new investors and traders were playing around in the market for the first time. It's a

longer story than this, but during this time, Wall Street bets latched onto the GameStop stock. Yes, the mall store that buys and sells used video games from 12-year-olds. Anyway, Reddit folks were hot for this stock. Some people turned it into their entire identity. And market conditions were, to put it bluntly, very weird. And as a result, a short squeeze popped off and the stock stayed high. So a fair number of people made money, a lot of money. I actually talked to one of these people on the show last year who made a million bucks on GameStop. This gold rush triggered the meme stock craze, and it was a whole thing until it sort of fell apart when brokerages started playing defense. But the mentality of there being free money around and a chance for the little investor

to make good has persisted in the dark corners of Reddit, Fintwit, and other such places on the internet. Some companies have leaned all the way into this. For example, AMC, the movie theater company, was popular during the meme stock craze. Some people involved in the meme stock craze would refer to themselves as apes. So, AMC began selling financial assets with the ticker name APE to raise money by marketing to the meme stock crowd. There's an ongoing lawsuit about these assets in particular, so how well this works out for everyone remains to be seen. But AMC wasn't the only company that got caught up in the stonks' energy.

Bed Bath & Beyond also featured heavily in the 2020-2021 stock market wild ride. Bed Bath & Beyond used to be known for their abundantly stocked stores and their regular coupons that we would get in the mail. Over the years, those coupons have become harder and harder to come by, and the shelves increasingly bare. Plus, one of their recent CEOs tried to make a Bed Bath & Beyond branded line of products happen. And nobody, not surprisingly, wanted any of that. The company had been circling the drain for a while, and by December 2022, that. The company had been circling the drain for a while, and by December 2022, they were ready to declare bankruptcy. But they had one weird trick up their sleeve. Because remember, they're one of the OG meme stocks, and they have a recognizable brand. Even if people

weren't actually shopping there, they were familiar with the store. So Bed Bath & Beyond struck a deal with a company called Hudson Bay Capital. The deal is incredibly complex, but the simplest way of explaining it is that Hudson Bay bought the rights to sell a billion dollars in Bed Bath & Beyond shares, plus financial assets that could be turned into shares. But the deal hinged on the stock price staying about $0.716 a share or above, which yes, you heard that right, is less than a dollar. So penny stock territory. And it almost worked for a while. Retail investors bought the stock. But remember, this is a company that is failing. It has no turnaround plan. They are closing stores, which leads me to the fundamental question, why buy? If you go into Trends or

watch videos about this, the pervasive narrative is that someone is going to come along and save the company, or that there is going to be a short squeeze, or that you could buy the dip and dollar cost average down to zero, I guess? The whole thing has been wild. But spoiler alert, it is now over. The company is officially declaring bankruptcy, so call your mom and tell her she should use those coupons if she's still got them, assuming she can find anything left in the store to buy. The bankruptcy filing means that shareholders will get absolutely nothing. Although there are sure to be lawsuits about the whole thing, unfortunately, the bankruptcy filing means that the shareholders will get absolutely nothing. For today's tip, you can take straight to the bank.

There are better places to get educated on the stock market than Reddit. Like Trade Like Einstein, a Money News Network podcast hosted by Peter Tuchman, who is an actual broker on the New York Stock Exchange. Not just some anonymous hype beast posting from God knows where. Never miss an episode and subscribe to Trade Like Einstein at the link in the show notes. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Levoy. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have

your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at moneynews and TikTok at moneynewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.