Fraud charges against the former chief financial officer of Bed, Bath & Beyond raise further questions about the struggling chain.
The death of a 52-year-old executive comes as the once-popular retailer, whose sales and stock prices have fallen over the past year, is struggling to reinvent itself. Arnal is also named as a defendant in a securities lawsuit that accuses him, his employer, and billionaire entrepreneur Ryan Cohen of a pump-and-dump scheme to increase Bed, Bath & Beyond stock.
Bed, Bath & Beyond did not respond to a request for comment. The company described Arenal’s death as a “shocking loss” on its website.
“Gustavo will be missed by his leadership, talent and everyone who has worked to lead our company. I am proud to be his colleague, and he will be truly missed by all and everyone of us at Bed Bath and Beyond Glad to know him,” Company President Harriet Edelman said in a statement.
Gamespot, where Cohen is president, also did not respond to a request for comment.
A Stock Shock – Then a Lawsuit
Bed, Bath and Beyond share has been on a roller coaster, rising duringbefore vanishing last year. The stock jumped again in March when Cohen, the founder of online pet products company Chewy.com, disclosed a nearly 10% stake in the company.
Cohen is credited with engineering the turnaround at GameStop, and some retail investors saw his ownership as a positive sign for Bed, Bath and Beyond. To kick-start the home goods company’s recovery, he quickly helped get Bed, Bath & Beyond’s CEO and chief marketing officer out the door, and hired two new directors.
Cohen filed further paperwork with the Securities and Exchange Commission on August 16, in which he reassigned ownership of Bed, Bath & Beyond. This led the stock to, But that same day, Cohen immediately began selling his stake, triggering a selloff that drove the company’s stock to a third of its original price within a week.
This prompted some to call for an investigation by the SEC, and on August 23 a shareholder lawsuit was filed in Washington, DC, district court, alleging securities fraud.
suit, which is seeking class-action status, claims
That Cohen, Arnell, JPMorgan and others were “involved in a fraudulent scheme to artificially inflate the price of the publicly traded BBBY” and that “the value and profitability of the BBBY” to entice retail investors to buy shares clearly misrepresented”.
According to the lawsuit, Cohen and Arnell devised a plan whereby Cohen would publicly publicize the company’s stock, while Arnell would limit the sale of stock by insiders, which would increase its price. The complaint also claims that Cohen lied when he rediscovered his ownership of the company and alleged that he had started selling his stock at that time.
Arnal also sold 55,000 shares of Bed, Bath & Beyond on August 16, although his disclosure states that plans to sell began in April.
The suit claims that Cohen and Arnell “engaged in illegal insider trading and fraudulent SEC reporting.” It also alleges that the duo “taken advantage of the inflated stock price and used fraudulent and misleading SEC filings to sell all of their BBBY shares and options at artificially inflated prices to unsuspecting and innocent public investors.” and then maintained control over the profits.”
Bed, Bath & Beyond told investors August 31 securities filing that “the Company is in the early stages of evaluating the complaint, but based on current knowledge the Company believes that the claims have no merit.”
Even before the shareholder suit, Wall Street’s outlook for Bed, Bath and Beyond had soured. Analysts at Wedbush downgraded the stock after Cohen’s move to liquidate his stake, “disconnecting” the price from the company’s fundamentals.
“Bed, Bath & Beyond” finds itself in an unreliable position as it faces a loss of market share, inventory overruns and dwindling cash reserves,” he wrote. [Bed, Bath & Beyond] manages to make progress against some of our operating targets in the coming quarters, we see current risk/reward skewed disproportionately downwards.”
Retailer Received $500 Million New Last Week Financing and outlined another change Plan That includes closing 150 stores, slashing a fifth of the workforce, and cutting store brands. It is still looking for a new CEO and Chief Marketing Officer.
The price of Bed, Bath & Beyond is down 68% over the past year, closing Friday at $8.63.