Bed, Bath and Beyond share price rose as three activist hedge funds prepared to launch a proxy contest.
Shares of the home-furnishings retailer rocketed higher nearly 30% on the news.Ancora Advisors, Legion Partners Asset Management, and Macellum Advisors are leveraging their combined 5% stake in Bed Bath & Beyond to launch a proxy context to replace the retailer's CEO and entire board of directors. The heavily shorted stock was up more than 25% on the news.
CEO Steven Temeres has led the company since 2003 and is backed by founders Leonard Feinstein and Warren Eisenberg, who remain shareholders and co-chairmen of the board. The retailer has struggled to keep pace with online competitors and the investor group has contended that it has failed to adapt to the new retail environment while allowing costs to increase and margins to shrink,In a research note published Thursday, Raymond James said a private equity take-out makes sense for a number of reasons including governance issues, low inside ownership, and out of the money stock options.
However, Morgan Stanley analyst Simeon Gutman advised investors to remain cautious. Gutman cited margin pressure from the industry's e-commerce shift and commensurate store traffic declines which will make it difficult to change Bed Bath & Beyond's trajectory of weakening margins. Gutman maintained an"underweight" rating and $13 price target.NOW WATCH:
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