New day, new short squeeze
Bed Bath and Beyond has had itself a week. The triple B spiked as much as 90% to $32 in after-hours trading Tuesday before pulling back overnight, and opening Wednesday’s trading session higher by 53% at $25.63. According to FactSet, “Bed Bath & Beyond has been among the most heavily shorted stocks in the country with 27% of its shares available for trading sold short. That’s the third-highest among the 1,500 largest U.S. stocks.” The run up in price could be attributed to a handful of announcements by the company.
- The company announced it was launching a new digital marketplace that would sell their goods as well as those from 3rd-party retailers. So, basically Amazon, but not as good…probably.
- They will also enter into a tie-up with Kroger. For those whose minds are not in the gutter, the tie-up will allow Bed Bath & Beyond to sell their products on Kroger’s website and in some of their physical stores.
- The company hired Anu Gupta and Rafeh Masood as Chief Growth Officer and Chief Customer Officer (sounds made up) respectively in order to support its stronger business model.
- The company said that its $1B share repurchase program will be completed by the end of fiscal 2021, which is two years ahead of schedule.
Whether shares of BBBY remain elevated for an extended period or revert back to where they were trading pre-announcement remains to be seen (no sh*t sherlock). That said, if you are considering trading these types of moves, make sure your trading strategy weighs the risks and rewards. Oh, and always keep those way too large blue coupons handy (even if they’re expired) because you never know when you’ll need them. *clearly mocking my wife as I write this*
Hertz So Good
Hertz Global Holdings (HTZZ) is pushing forward with a “re-IPO
“, which will consist of a sale of 37.1M shares with a price target of $35 to $39 per share. In a ginormous version of Pimp My Ride, the two firms that bought Hertz out of bankruptcy in May, Knighthead Capital and Certares Management, are offering the shares.
- The offering is scheduled to price on Monday with trading to follow the next day under the ticker symbol HTZ.
- The company itself will receive no proceeds from the sale, but is planning to buy $250M-$500M of shares from the underwriters of the transaction. These guys definitely seem like the type to buy the extended vehicle warranty and walk out of the dealership thinking they got a great deal.
- Shares of HTZZ were down 9.3% on Wednesday, so the market seems to like this deal about as much as a Pontiac Aztek.
It’s been quite a ride for Hertz, from filing for bankruptcy in May of 2020, to becoming a meme stock favorite of the Robinhood crowd. In just the past month the company has announced former Ford CEO Mark Fields as interim CEO as well as plans to buy 100k Teslas. Right now, it seems as though trading in Hertz could remain as wild as riding shotgun with Lindsay Lohan nearly ten years ago. So, plan accordingly.
Let the Tapering Begin
Tapering is here at last. During the Federal Open Market Committee meeting on Wednesday, the Fed announced that they’ll do what everyone expected of them and begin tapering asset purchases in mid-November. This will occur at the rate of $15B/month, reducing long-term Treasury bond purchases by $10B and mortgage-backed securities by $5B. This will bring November bond purchases down from $120B to $105B and puts the Fed on track to stop coddling the economy entirely by July 2022.
- In addition to the tapering, the Fed doesn’t plan to raise interest rates anytime soon, and even has the gall to insist that inflation’s 30-year high is still “transitory.” J-Pow believes that inflation will abate when supply chain issues do, around mid-2022.
- According to the Fed, we shouldn’t expect them to raise the interest rate until about that time. Because bond purchases and interest rate hikes serve opposite purposes, the Fed wants to avoid doing both simultaneously and will probably wait until tapering is done to implement a hike.
- In classic dove fashion, J-Pow attributes the Fed’s decision to sit on the interest rate to an employment rate that’s still lower than they’d like.
Some hawks and Wall Street analysts expect more and faster rate hikes than the mild once-a-year mid-2022 forecast the Fed gave in September. If they’re right, the market will contract as borrowing becomes more expensive. Keep an eye out for any adjustments the Fed may make to their timeline, because as inflation has remained elevated they’ve taken a more uneasy tone, and admitted the timeline might change.