Bed Bath & Beyond shares fall 15% at opening after death of CFO named in alleged fraud scheme
Shares of Bed Bath & Beyond continued to fall sharply after the sudden death of the company’s chief financial officer last week and the news that he was named in an insider trading lawsuit.
Shares of the home improvement retailer fell 15% to just over $7.30 as Wall Street reopened after the Labor Day holiday, less than half what it was a week ago and below its mid-August high of $23.08.
CFO Gustavo Arnal, who fell to his death from the 18th floor of a Manhattan skyscraper on Friday, was named in a recent lawsuit accusing him of fraud.
His death comes as the company is reportedly suffering heavy losses amid the Covid-19 pandemic and sharp inflation this year. Insider.
He was named in a federal class-action lawsuit less than two weeks ago on charges of federal securities fraud, insider trading and breach of fiduciary duty, court documents filed by independent programme.
The lawsuit comes as Bed Bath & Beyond plans to close 150 of its 900 stores, along with massive layoffs affecting 20 percent of the company’s workforce.
Chief accounting officer Lauren Crossen has been named interim chief financial officer as of Monday, the company said in a regulatory filing. She will also continue in her previous role.
Mr. Arnal and activist investor and GameStop chairman Ryan Cohen are cited in the lawsuit.
They are accused of collaborating on a “fraudulent scheme to artificially inflate the price of Bed Bath & Beyond’s publicly traded stock.”
The lawsuit, filed Aug. 23 in U.S. District Court for the District of Columbia, alleges that the couple made “material misrepresentations about the financial condition and holdings” of the home improvement company for their financial benefit. The main plaintiff is the investor, Si Pengcheng.
The lawsuit was filed against them, stating: “Defendants knew that their disclosures were false, exploited inflated stock prices, and used fraudulent and misleading SEC filings to sell all of their [Bed Bath & Beyond] Offer stocks and options to unsuspecting and innocent public investors at artificially inflated prices and then retain control of the profits. “
On August 18, both Mr. Arnal and Mr. Cohen sold their shares in the company, with the former selling more than 42,000 shares for about $1 million, while the latter sold his entire 9.8 percent stake through his firm, RC Ventures.
The company’s stock price then plummeted from a high of $23.08 and is now continuing to fall after the U.S. holiday weekend in early September, approaching $7 by mid-morning.
According to the lawsuit, Mr. Cohen, Chewy’s co-founder and GameStop chairman, allegedly approached Mr. Arnal as early as March 2022 about his “pump and dump” plan and “convinced Gustavo that their plan would be mutually beneficial. ,” and they would make a decent profit from it by coordinating their stock sales to optimize returns.
The lawsuit added that Mr. Cohen had previously been involved in similar “pump and sell” schemes, such as promoting GameStop to so-called “meme stock” status to raise much-needed funds.
Investors were told on Wednesday that the company would abandon its own brands and start focusing on selling other brands. They were also told that the company had obtained loans from Sixth Street Partners and JPMorgan Chase to ensure it continued to operate.
Like many companies weathering the twin storms of post-pandemic America and high inflation, Bed Bath & Beyond has had a tumultuous year.
Chief executive Mark Tritton was ousted in June after the company reported extremely low sales for two consecutive quarters. Insider. He was replaced by Sue Grove, a former member of the company’s board of directors.
The fact that the company’s public-market shares have become a sort of “meme” — often an indication of price volatility as online traders come in and out — has only added to the chaos in its finances.
Police responded to a 911 call on Friday and found a 52-year-old man dead near the 56 Leonard St building in Tribeca known as the “Jenga” tower, Reuters reported. The man, found to be Mr Arnal, “appears to have suffered injuries from a fall”.
The executive died of multiple blunt trauma and committed suicide, the New York City Medical Examiner’s Office said Sunday night, NBC News reported.
Bed Bath & Beyond released a statement Sunday.
“I would like to extend my sincerest condolences to Gustavo’s family. Gustavo’s leadership, talent and stewardship of our company will be remembered by all of his colleagues. I am proud to be his colleague, Bed Bath & He will be greatly missed by everyone at Beyond and by all those who were fortunate enough to know him,” said Harriet Edelman, Independent Chairman of the Board of Directors of Bed Bath & Beyond Inc. “Our focus is to support 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 served as Chief Financial Officer of Avon and spent two decades at Procter & Gamble.
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