The former Bed Bath & Beyond Inc., seeking to generate cash for its creditors, sued to recover more than $300 million in trading profits from Hudson Bay Capital Management, the hedge fund at the center of a last-ditch financing plan that failed to prevent the retailer’s collapse.
The former retailer filed a lawsuit last week claiming that, behind the scenes, Hudson Bay orchestrated the terms for a February 2023 offering so it could acquire a huge, cut-rate stake in Bed Bath without having to disclose the ownership under a little-known rule for corporate insiders.
The law also requires executives — and outside investors with stakes of more than 10% — to surrender short-term gains.
As a result, Hudson Bay was able to acquire almost all of the convertible preferred shares and warrants that Bed Bath issued through the sale, according to the lawsuit. These securities, in turn, allowed the hedge fund to buy hundreds of millions of shares from Bed Bath at a deep discount that Hudson Bay then traded to generate quick gains, the suit claims.
Bed Bath was desperate for cash at the time, as Wall Street bankers were threatening to push the home-goods company into bankruptcy to salvage some of their investments.
While some investors saw the Hudson Bay backing as a potential path for Bed Bath to reverse its fortunes, the lawsuit alleges the hedge fund aimed to make a quick buck by capitalizing on Bed Bath’s popularity as a so-called meme stock.
“When all was said and done in April 2023, BBBY was bankrupt, while the Hudson Bay defendants had reaped a short-swing profit of over $300 million,” Bed Bath said in the complaint.
Actions by a bankrupt company’s shell are the purview of the bankruptcy administrator, which acts on behalf of the estate to maximize its value and thus the recoveries of creditors. Michael Goldberg, an attorney for the law firm Akerman who’s serving as plan administrator for the bankruptcy, declined to comment through a spokesperson. Goldberg authorized the filing of the complaint, a person familiar with the situation said.
Hudson Bay, which managed about $20 billion at year-end, said in a statement that Bed Bath creditors were behind the lawsuit, and that the hedge fund never owned more than 10% of the retailer’s shares.
“It is sad that creditors seeking to distract from their significant financial losses have resorted to filing factually flawed and baseless claims in a desperate…
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