Shares in Bed Bath & Beyond continued their sharp fall following the sudden death of the company’s CFO last week, and the news he was named in an insider trading lawsuit.
As Wall Street reopened after the Labor Day holiday, the home goods retailer saw its share price fall 15 per cent to just over $7.30, less than half of what they were a week ago and down from a mid-August high of $23.08.
CFO Gustavo Arnal, who fell to his death from the 18th floor of a skyscraper in Manhattan on Friday, was recently named in a lawsuit accusing him of fraud.
He died at a time when the company was experiencing severe losses in the face of the Covid-19 pandemic and this year’s substantial inflation, according to Insider.
Less than two weeks ago he was named in a federal class-action lawsuit concerning allegations of federal securities fraud, insider trading, and breach of fiduciary duty, court documents reviewed by The Independent show.
The lawsuit comes as Bed Bath & Beyond plans to close 150 of its 900 stores, along with a mass layoff, affecting 20 per cent of its corporate staff.
Chief accounting officer Lauren Crossen has been named as interim CFO as of Monday, the company said in a regulatory filing. She will also continue in her previous role.
Mr Arnal is cited in the suit along with activist investor and GameStop chairman Ryan Cohen.
They are accused of collaborating in a “fraudulent scheme to artificially inflate the price of Bed Bath & Beyond’s publicly traded stock”.
The suit, filed in the United States District Court for the District of Columbia on 23 August, claims that the pair provided “materially false statements regarding the financial condition and holding situation” of the home goods company for their financial benefit. The lead plaintiff is listed as investor Pengcheng Si.
Laying out the case against them, the suit states: “The defendants, knowing that the information they disclosed was false, took advantage of the inflated stock price and used fraudulent and misleading SEC filings to sell all their [Bed Bath & Beyond] shares and options at artificially inflated prices to unsuspecting and innocent public investors and then retained control of the profits.”
On 18 August, both Mr Arnal and Mr Cohen sold shares of the company, with the former selling more than 42,000 shares for an estimated $1m, and the latter selling the entirety of his 9.8 per cent stake through his firm, RC Ventures.
Shares in the company then plummeted from the high of $23.08, and have now continued to fall after the early September holiday weekend in the US, nearing $7 by mid-morning.
According to the lawsuit, it is alleged that Mr Cohen, co-founder of Chewy and chairman of GameStop, approached Mr Arnal about his “pump and dump” scheme as early as March 2022, and “convinced Gustavo that their plan would be a mutually beneficial one” from which they would profit handsomely by coordinating their share sales to optimise returns.
The lawsuit adds that Mr Cohen has previously been involved in similar “pump and dump” plans, such as elevating GameStop to so-called “meme stock” status to raise much-needed capital.
Bed Bath & Beyond has said it is evaluating the complaint, but believes it to be without merit and will not comment on ongoing litigation, CNBC reports. Mr Arnal’s stock sales were preplanned as part of an agreement he signed in April.
Investors were told on Wednesday that the company would shift away from its own brands and begin focusing on selling other labels. They were also told that the company had secured loans from Sixth Street Partners and JPMorgan to secure its continued operation.
Like many companies weathering the dual storms of a post-pandemic America and high inflation, it has been a tumultuous year for Bed Bath & Beyond.
CEO Mark Tritton was pushed out in June after the company reported extremely low sales two quarters in a row, per Insider. He was replaced by Sue Grove, who formerly sat on the company’s board.
The fact that the company’s public market shares became something of a “meme stock” – usually indicative of price volatility as online traders jump on and off the bandwagon – only added to the chaos of its financial situation.
On Friday, police responded to a 911 call and found a 52-year-old man dead near the 56 Leonard St building dubbed the “Jenga” tower in Tribeca, according to Reuters. The man was found to be Mr Arnal and “appeared to suffer injuries from a fall.”
The New York City medical examiner’s office said late on Sunday that the executive died from multiple blunt trauma and had taken his own life, CNBC reports.
Bed Bath & Beyond issued a statement on Sunday.
“I wish to extend our sincerest condolences to Gustavo’s family. Gustavo will be remembered by all he worked with for his leadership, talent and stewardship of our Company. I am proud to have been his colleague, and he will be truly missed by all of us at Bed Bath & Beyond and everyone who had the pleasure of knowing him,” Harriet Edelman, Independent Chair of the Bed Bath & Beyond Inc Board of Directors, said. “Our focus is on supporting his family and his team and our thoughts are with them during this sad and difficult time. Please join us in respecting the family’s privacy.”
Before joining Bed Bath & Beyond, Mr Arnal worked as a CFO for Avon and spent two decades working at Procter & Gamble.
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