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Why Bed Bath & Beyond Stock Rose ~22% on March 26

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The announcement

On March 26, Legion Partners Asset Management, Macellum Advisors, and Ancora Advisors, the three activist funds that together own a ~5% stake in Bed Bath & Beyond (BBBY), nominated 16 candidates for election to BBBY’s board.

The activist funds stated at the annual meeting that the magnitude of value destruction with the company’s stock price fall of ~78% in the last five years, the failure of the board to hold itself and the management accountable for poor performances, and hefty pay packages have prompted them to campaign for the replacement of the existing board.

In response to the activist funds’ accusations, BBBY issued a press release stating, “Members of our Board of Directors and senior management team have met with and held several discussions with Legion and Macellum over the past few weeks. Ancora has not previously reached out to or engaged with the Company. In these conversations, we made clear our commitment to engaging constructively and acting in the best interest of all Bed Bath & Beyond shareholders. We asked on several occasions for their suggestions and ideas for improving the Company’s business but they did not provide any. We also invited them to participate in the Board refreshment program we have been undertaking in recent years and are in the process of accelerating with investor input. Instead they chose to publicly attack the Company and provide their intent to nominate directors to take over the full Board. Unfortunately, while our directors and management were seeking to engage in good faith, it appears that the Legion and Macellum representatives were merely seeking information to support their attack.”

Stock performance

The announcement by the activist funds appears to have led BBBY’s stock price to rise to a high of $18.09 on March 26 before closing the day at $16.92, which represents a rise of 22% from its previous day’s closing price. The company has returned 49.5% since the beginning of this year. In comparison, peers Williams-Sonoma (WSM) and RH (RH) have returned 13.6, and 9.0%, respectively. The SPDR S&P Homebuilders ETF (XHB) has returned 17.5% YTD.

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