The story of Bed Bath & Beyond is our story, the story of the United States here in the fin de siecle of The Long Now, where our entire country has been busted out and stripped for parts by grown men, rapacious men, different from Tony Soprano only in that they plunder legally within a system of courts and laws and regulatory agencies.
The story of Bed Bath & Beyond is the story of what happens when Story ends, when the reality of the bust-out — crappy stores and crappy management and overwhelming debt — finally swamps the narratives of Stock Buybacks!TM and Turnaround!TM and Short Squeeze!TM.
And maybe a story of hope.
Hope how?
Hope that the reality of the American bust-out — crappy institutions and crappy leaders and overwhelming debt — will begin to swamp the narratives of Yay, Stock Market! and Yay, College! and Boo, MAGA! and Boo, Wokeism!.
Hope that the assignment of losses here at the end of an age will force us to call things by their proper names, to identify weakness as weakness and rapaciousness as rapaciousness and narrative as narrative. Hope that we will have the courage to reject them all. Hope that we will choose to be more clear-eyed and more full-hearted as we move forward with resolve to Make/Protect/Teach in the world beyond bust-out.
So here is the story of the weak and the rapacious and the narrative-driven. Here is the story of Bed Bath & Beyond. Not for shame or schadenfreude, but for hope.
***
There are at least three distinct phases of the Bed Bath & Beyond bust-out.Bust Out 1 was orchestrated by the original founders and management of the company. This is where most of the money was sucked out of the company, and by the time the original founders and management were deposed in May 2019, the company was already dead.
Bust Out 2 was orchestrated by the management team that replaced the Bust Out 1 team, together with an external investor, Ryan Cohen.
Bust Out 3 is so outrageous – a self-proclaimed functionally bankrupt company selling self-proclaimed worthless equity to meme investors, degenerate gamblers all – that I just call it the lulz period.
Both Bust Out 2 and the lulz period were quite speedy looting operations, so I’ve zoomed in on the past 12 months to show the stock price moves more clearly. In particular, the exit spike for Ryan Cohen’s Bust Out 2 sale was so fast that his exit price of $22+ per share doesn’t even register on the long-term chart above!
In general, I think this is a common factor in all bust-out processes, whether of a company or a country, that the individual bust-out episodes become shorter, sharper and more ridiculous as there’s less and less juice to squeeze out of the orange. (...)
Bust Out 1 was orchestrated by CEO Steve Temares and company founders Leonard Feinstein and Warren Eisenberg after the disastrous 2013 Christmas shopping season. (...)
In response, Temares and the board announced a Strategic Plan! TM to reinvigorate the company, complete with a $1.5 billion bond offering, the first debt in company history. What was at the core of this grand plan, you ask? Well of course there were words like “building a leading e-commerce presence” and “targeted acquisitions” and “commitment to excellence”, but the main plank of the 2014 strategic plan and the only thing management actually executed on was simply this: Stock Buybacks! TM. (...)
Over the 6-year period of Bust Out 1, the board and management of Bed Bath & Beyond spent $4.4 billion buying back their own stock on total free cash flow of $3.6 billion. As their stores deteriorated and their margins collapsed, this company spent ALL of their free cash flow and then $800 million MORE buying back stock.
Now that’s a bust-out!
How did this personally benefit Temares, Feinstein and Weisenberg? Well, I compiled the 100+ SEC filings from these gentlemen to find out.
Steve Temares is a real estate lawyer who was hired by the company as their general counsel in 1992 and worked his way up the ranks. He’s not a founder. He’s not an entrepreneur. He’s a real estate lawyer who went from general counsel to executive VP to COO to CEO in 2004. I do not think it was an accident that Bed Bath & Beyond also instituted their stock buyback plan when Temares was named CEO.
As CEO, Temares was granted a total of 5.2 million shares of stock over his tenure, either as options that he immediately sold on exercise or as stock grants at no cost. He never bought a single share of Bed Bath & Beyond on the open market, but was reloaded by the board of directors every few years.
As CEO, Temares sold 4.3 million shares of stock for $148.4 million. This is net of all option exercise costs. This is in addition to his cash salary, bonuses and benefits, which averaged more than $4 million per year during the Bust Out 1 period. This is solely in connection with his personal holdings and is separate from the dozens of transactions associated with the family trust he established to exercise and sell additional BBBY options. After being fired as CEO, Temares sold an additional 900,000 shares for an estimated $18 million. This is in addition to his cash severance package of $36 million. In sum, Steve Temares received well in excess of $200 million in cash from Bed Bath & Beyond shareholders, the majority of this during or after Bust Out 1.
As for co-founders Leonard Feinstein and Warren Eisenberg, after the stock buyback program was introduced they each sold more than 10 million shares for an estimated $300 million. Each. This is in addition to the CEO-level salaries, bonuses and benefits they received as Co-Chairmen of the Board (my fave benefit was $230,000 in car service allowances per year; I mean, how is that possible?). This is in addition to the millions spent to make all-cash acquisitions of retail operations started by their sons, most famously $86 million in cash to acquire buybuy Baby from Leonard Feinstein’s son, including the retirement of $19 million in debt owed to the Feinstein family.
Honestly I don’t get as worked up over founders taking huge amounts of money out of a company as I do over managers, and if Bed Bath & Beyond had remained a private company that the founders decided to suck dry and leave to their kids … more power to ’em. But that wasn’t what Feinstein and Eisenberg did. They took the company public, dominated the board with Steve Temares, and used stock buybacks to prop up the stock price and sell tens of millions of shares into the open market. Feinstein and Eisenberg were old school merchants! You’ll never convince me that they didn’t understand exactly what was happening with the accelerated operational decline of the company from 2014 forward and exactly what were the consequences of spending 122% of free cash flow on stock buybacks.
It’s no wonder that Temares, Feinstein and Eisenberg were all kicked out of the company in 2019, but by then the fatal damage was already done.
by Ben Hunt, Epsilontheory | Read more:
Image: uncredited
[ed. More American capitalism TM at its finest.]
