One of the actions that constantly make the headlines in recent days is Bed bath and beyond (NASDAQ:BBBY). This former meme action raised eyebrows this week over its debt-for-equity swaps, which saw a significant number of shares issued to pay off some of the company’s senior secured debt. Today there is another key update that brings more volatility with BBBY stocks.
Recent filings with the Securities and Exchange Commission (SEC) show that two of the company’s executive vice presidents sold shares last week. While these stock sales seem rather intangible (totaling around 1,500 shares combined for a value of less than $5,700), it’s the latest development that may be making investors nervous.
In general, insider selling activity is not a positive signal for any stock. Insiders who are optimistic about a company’s trajectory typically want to hold onto their options, capitalizing at a much higher price. That said, insider selling may occur from time to time for personal reasons. Thus, it is a somewhat difficult metric to use as a signal, especially when sales are so small.
That said, let’s dive into what to do with recent news around Bed Bath & Beyond.
Is it time to bail out BBBY stocks?
Normally, significant insider selling activity is worrisome to investors. While the moves posted today via the filings mean that some selling has taken place, the rather insignificant amounts sold don’t really paint an extremely bearish picture. Thus, it is perhaps unsurprising to see BBBY shares trading relatively flat today.
That said, the stock offerings the company has taken over the past two weeks are of greater concern. Given the low valuation of Bed Bath & Beyond, issuing shares at this level is not advantageous for investors. Indeed, the dilution that accompanies these emissions could impact long-term gains.
That said, given the indebtedness of the company, these measures are perhaps the best. For those worried about the prospects of this company, limiting its debt might be the way to go. Currently, I view BBBY stocks as an option on the performance of the underlying company in the short term. It’s a risky bet, insider selling or not.
As of the date of publication, Chris MacDonald had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.