Shares of Bed Bath & Beyond plunged 16% on Monday after the struggling retailer reportedly hired a prominent law firm known for its work in bankruptcy restructurings.
The Union, NJ-based home goods chain has hired Kirkland & Ellis and is late on its payments to vendors, leading some to restrict shipments or halt them altogether, according to a Bloomberg report.
“If the company does not secure adequate financing to appease its vendor base, it might have not appropriate inventory for the key holiday period, leading to a fast downward spiral and creating bankruptcy risk,” according to a note by Wedbush analyst, Seth Basham.
A cascade of bad news for the retailer was ignited last week when billionaire investor Ryan Cohen pulled his stake out of Bed Bath & Beyond, bagging s $68.1 million profit.
It’s unclear what prompted Cohen to sell his position in the company, which forced out its CEO in June due to the company’s subpar performance. Cohen had successfully pushed for the company to add three new board directors and has also urged the retailer to sell itself.
Cohen, who co-founded Chewy and is the chairman of GameStop purchased more than 7 million shares of Bed Bath & Beyond earlier this year.
There is concern that the company may not have enough cash and that vendors will demand payment upfront before shipping the struggling retailer goods.