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Bed Bath and Beyond files for bankruptcy

nytimes.com

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Re: Bed Bath and Beyond files for bankruptcy

#111

Post by zo1 »

cratermoon wrote: post #62
bombcar wrote: post #42

Earlier quoted context omitted.

You know those Prop 65 warnings you see on everything? It's the difference between a company sticking it on everything "just in case" and a company with the CancerTron-9000™ rebranding as "edible low-fat sweets" with that label on it. Every single filing with the SEC contains language that is basically 'holy shit we could go bankrupt tomorrow because billions of reasons' - that's different from "we know we're going d…

My favorite of the moment is 'gluten free'. Seen on things that physically cannot have gluten in them, unless it's contaminated somehow.

I've seen "vegan" dishwasher soap, too.

Re: Bed Bath and Beyond files for bankruptcy

#112

Post by dragontamer »

BaseballPhysics wrote: post #107
steveBK123 wrote: post #99

Earlier quoted context omitted.

Yes it does. Just because someone does inevitably win the lottery does not make lottery ticket buying financially literate & savvy.

It's ironic that you make that comparison, as a lot of very very financially literate people buy lottery tickets because they know they're taking a risk , they know the probabilities , and they still do it because it's fun . For the same reason, some of the most brilliant minds out there gamble on games of chance, or engage in sports betting, or other high risk activities. Just because someone takes a risk that you w…

No. It makes you a gambler.

And gamblers don't usually make money, because they're in it for entertainment rather than making money, saving money, or providing for their families.

Believe it or not, investing is an activity that, under the correct circumstances, leads to the benefit of the investor, the company, and the economy in general. I personally seek this behavior that's beneficial to society in general (and its non-zero sum: I trade liquidity that I have today for the promise of modest future gains). Like 5%/year (aka, the current FFR / risk free rate) to 15%/year on the riskier bets on good years.

People looking for returns much larger than 5% to 15%/year today are gambling. That's just not the speed at which companies grow, so you're betting that other people have undervalued a company, or you're betting on a "Greater fool" swooping in to rescue you. You're not betting on the underlying mechanisms that lead to economic growth.

Re: Bed Bath and Beyond files for bankruptcy

#113

Post by Wowfunhappy »

itake wrote: post #64
neurobama wrote: post #52

Earlier quoted context omitted.

The whole stock market in 2023 makes no sense to me, not just Bed Bath and Beyond. So many companies no longer pay dividends. So many classes of stock are now non-voting shares. Common stock shareholders usually get nothing if a company goes bankrupt and liquidates. So if I don't get dividends, can't vote, and am not entitled to a share of the company's assets, what is the actual value in owning stock? Do I just wait…

My understanding is buybacks are better than dividends for tax purposes, because with dividends you pay income tax and buy packs you pay capital gains.

But the question remains, what exactly are you buying, and how is it tied to the actions of the company? This has long confused me as well with regard to non-voting shares.

Re: Bed Bath and Beyond files for bankruptcy

#114

Post by sbierwagen »

HDThoreaun wrote: post #77
itake wrote: post #64

Earlier quoted context omitted.

My understanding is buybacks are better than dividends for tax purposes, because with dividends you pay income tax and buy packs you pay capital gains.

Dividends pay the exact same tax rate as selling stock which is how you make money from buybacks. The difference is that buybacks allow you to take the income in the future and shift the tax burden timing. Both dividends and stock selling are normal income tax rate if you've held the stock for less than 6 months and capital gains rate if you've held for more.

LTCG threshold is one year, not six months.

Re: Bed Bath and Beyond files for bankruptcy

#115

Post by NoboruWataya »

neurobama wrote: post #52
humanlion87 wrote: post #8

I find the whole situation fascinating. Bed Bath continued to sell hundreds of millions of shares while they were preparing for bankruptcy and retail investors (or meme stock investors) continued to buy them. I assume Bed Bath did all the paperwork that is necessary (like calling out risks, that the raised capital will go to creditors first, etc) for such a stock sale. But it is clear they were doing it out of bad-fa…

The whole stock market in 2023 makes no sense to me, not just Bed Bath and Beyond. So many companies no longer pay dividends. So many classes of stock are now non-voting shares. Common stock shareholders usually get nothing if a company goes bankrupt and liquidates. So if I don't get dividends, can't vote, and am not entitled to a share of the company's assets, what is the actual value in owning stock? Do I just wait…

Others have mentioned buybacks, but the broader point is that if a company is consistently profitable, it will eventually pay dividends (or do buybacks). The board, who decide what to do with the company's money, have fiduciary obligations to the shareholders. They can hold cash reserves to cover future liabilities and they can re-invest profits in growing the business, but ultimately when the board cannot identify profitable investment opportunities, that money has to go back to the shareholders.

Also, it is only in insolvent liquidations that shareholder get nothing back. If the company were to wind up while still solvent, the shareholders would get their share of its net assets. (Though I don't think this happens much with public companies.)

Re: Bed Bath and Beyond files for bankruptcy

#116

Post by aketchum »

Wowfunhappy wrote: post #113
itake wrote: post #64

Earlier quoted context omitted.

My understanding is buybacks are better than dividends for tax purposes, because with dividends you pay income tax and buy packs you pay capital gains.

But the question remains, what exactly are you buying, and how is it tied to the actions of the company? This has long confused me as well with regard to non-voting shares.

you are buying a piece of future cash flows from that company, discounted based on risk of realizing those cash flows

Re: Bed Bath and Beyond files for bankruptcy

#117

Post by [deleted] »

BaseballPhysics wrote: post #75
gizmo wrote: post #15

Earlier quoted context omitted.

Bed Bath followed the email scammer strategy of making their scam so obvious only the most financially illiterate people could fall for it. Hard to pull of, but once you've got an investor base that's willing to believe anything you can dilute them repeatedly and they'll still believe it's 5D chess.

Eh, frankly, I think that does a disservice to the people buying the stock. Were a bunch of people buying into the meme stock hype? Sure. Does that make them financially illiterate? Well, the folks who bought Hertz sure look pretty damn smart in hindsight even though at the time they were being described in similar ways, so... who's to say if they are illiterate or just have a different view of value and risk?

[deleted]

Re: Bed Bath and Beyond files for bankruptcy

#118

Post by spaceman_2020 »

neurobama wrote: post #52
humanlion87 wrote: post #8

I find the whole situation fascinating. Bed Bath continued to sell hundreds of millions of shares while they were preparing for bankruptcy and retail investors (or meme stock investors) continued to buy them. I assume Bed Bath did all the paperwork that is necessary (like calling out risks, that the raised capital will go to creditors first, etc) for such a stock sale. But it is clear they were doing it out of bad-fa…

The whole stock market in 2023 makes no sense to me, not just Bed Bath and Beyond. So many companies no longer pay dividends. So many classes of stock are now non-voting shares. Common stock shareholders usually get nothing if a company goes bankrupt and liquidates. So if I don't get dividends, can't vote, and am not entitled to a share of the company's assets, what is the actual value in owning stock? Do I just wait…

Everything has been fundamentally detached from reality, from stocks to housing.

Houses can sit empty without tenants for years but they’ll only go up. Companies can be unprofitable for literal decades but they’ll keep finding funding and buyers. Commercial properties can bleed tenant but the prices will only be up.

In a world of shrinking growth , stalling productivity, and dying demographics, the market behaves like infinite growth is baked in.

It’s very clear to any observer that the markets don’t follow any rationality anymore.

Re: Bed Bath and Beyond files for bankruptcy

#119

Post by gamblor956 »

patrickthebold wrote: post #32
humanlion87 wrote: post #8

I find the whole situation fascinating. Bed Bath continued to sell hundreds of millions of shares while they were preparing for bankruptcy and retail investors (or meme stock investors) continued to buy them. I assume Bed Bath did all the paperwork that is necessary (like calling out risks, that the raised capital will go to creditors first, etc) for such a stock sale. But it is clear they were doing it out of bad-fa…

Random thought and I figure there must be a law against this: But what about the opposite, could a company sell off it's assets and do stock buy backs right until it goes bankrupt so that some investors get more $ ahead of the creditors?

It's been tried occasionally a few times over the past century. Most attempts at sham bankruptcies have not succeeded, and the few that went through are still under litigation (see the Johnson and Johnson case from a few years ago).

Bankruptcy law is administrative law, so courts are not limited to the letter of the law when assessing bankruptcy proposals; they are allowed to look at the intent of the la as well.

Re: Bed Bath and Beyond files for bankruptcy

#120

Post by aketchum »

HDThoreaun wrote: post #77
itake wrote: post #64

Earlier quoted context omitted.

My understanding is buybacks are better than dividends for tax purposes, because with dividends you pay income tax and buy packs you pay capital gains.

Dividends pay the exact same tax rate as selling stock which is how you make money from buybacks. The difference is that buybacks allow you to take the income in the future and shift the tax burden timing. Both dividends and stock selling are normal income tax rate if you've held the stock for less than 6 months and capital gains rate if you've held for more.

Are you sure about this? I believe you would prefer a share value increase of $1 instead of a dividend of $1, as you are taxed on dividends as income (income tax) but stock appreciation is capital gains (lower tax than income tax). This is in the context of American taxes.
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