I don’t know what to say? All of this was quite well disclosed. Back when Bed Bath did the Hudson Bay deal in January, it said in the prospectus that it intended to use all the money it raised to repay debt, and that if it didn’t raise a billion dollars in that deal (it did not) then it “would not have the financial resources to satisfy its payment obligations,” it “will likely file for bankruptcy protection,” “its assets will likely be liquidated” and “our equity holders would likely not receive any recovery at all in a bankruptcy scenario.” All of the legal documents were pretty clear that Bed Bath was raising money by selling stock to retail investors, that it was handing that money directly to its creditors, that the money probably wouldn’t be enough, that Bed Bath was probably going bankrupt, and that when it did the stock that it had just sold to those retail investors would be worthless. And things have worked out exactly as promised. No one can be surprised!
And yet it is one of the most astonishing corporate finance transactions I’ve ever seen? The basic rules of bankruptcy are:
When a company is bankrupt, the shareholders get zero dollars back, and the creditors get whatever’s left.
The shareholders don’t get less than zero. They don’t put more money in .
Here, I mean, Bed Bath was kind of like “hey everyone, we went bust, sorry, but our lenders are such nice people and they could really use a break, we’re gonna pass the hat and it would be great if you could throw in a few hundred million dollars to make them feel better.” And the retail shareholders did! With more or less complete disclosure, they bought 622 million shares of a stock that (1) was pretty clearly going to be worthless and (2) now is worthless, so that Bed Bath could have more money to give to its lenders when it inevitably liquidated.
I mean hasn’t BBBY been considered a meme stock for a while now though? I thought it was one of the ones r/wallstreetbets was monkeying around with a while back? No one is buying up shares of that for their IRAs and such.
yes, they were originally going to file bankruptcy in january, but knowing they were a meme stock they delayed it and put a ton of additional worthless shares up for sale so they could bilk the redditors out of a few hundred million more before they officially filed.
It started as a WSB meme but then migrated to its own BBBY subreddit of true believers, where any apes with a few brain cells to rub together were gradually banned / filtered out until all that remained were the aggressively stupid ones and the place became indistinguishable from a cult.
These are the kinds of people still buying/holding the stonk as a fundamentals play:
Later that day, he went to the apartment of the former CFO who had killed himself by jumping off the roof. He was there to harass the guy’s widow, but the doorman stopped him, at which point he accused the doorman of being in on the hit job that Jim Cramer had allegedly ordered.
Lol, some of those had them at a sell when they were at a 100 but doubling in price is certainly a sign to buy. I wonder if they changed their tune on Netflix yet.
New Ibonds rate is out. It’s only 4.3%, but any bonds purchased between May 1 and October 31 get a fixed rate of 0.90%. That is the highest fixed rate since 2007 and is obviously better than the 0% fixed rate I have in my two tranches.
I don’t think there’s any issue with that at all - just a simple sell and buy, with maybe a few days of settlement time required (I’ve never sold, so I’m not sure) and the following caveats that you probably already know:
That doesn’t let you increase the total amount of I-Bonds, because that exchange would count towards your 2023 limit.
You can’t sell any that you’ve owned for less than 12 months.
If you’ve held for less than 5 years, selling now loses 3 months of interest (which, based on current rates, is probably really high)
Ugh I just bought into two large-cap funds last week in an attempt to “diversify” more and looked at where their holdings are and, sure enough, the top two in BOTH are Apple and Microsoft
In theory, if you’re indexing, you want to buy the market, and you want your holdings to be in proportion to their market caps. At this particular time, AAPL is about 7% and MSFT is about 6% of that total and I don’t think there’s any inherent theoretical risk in this.
If it bothers you, it’s possible to find a product that uses some different weighting other than market cap. The most obvious is something like RSP (Invesco SP500 Equal Weight ETF). Equal weight just means they keep each of the 500 stocks at 0.2% of the total. They claim this gives you a slight improvement in historical performance through the increased diversification but you’ll also pay a slightly higher expense ratio compared to something more basic.
Apple and Microsoft are unquestionably the #1 and 2 best companies to invest in. They really aren’t in the same category with anything else. And everything has and will contiinue to get more cominggled in the future anyway, I think.
There is a huge risk increase in holding the runner ups like Google and Amazon compared to the two former.
