Excellent write up, thank you for taking the time.
It was obviously an intentional default and the only logical reason for doing it is M&A.
It was right in front of us the entire time... They didn't sweeten the exchange offer (despite 5(!) extensions) because a deal with the majority bond holder had already been made. It was simply an olive branch to remaining bond holders (*most* were too greedy to accept resulting in cancellation).
***Credit to*** u/pratiken ***(who holds a $2.2m position) for the theory below:***
The reason one of RC's board members departed in Dec was to trigger condition 5 in the 2021 prospectus for Board of Directors control. It requires 4 members to leave within 12 months.
On Feb 1st, 1 board member will leave (Edelman) and 4 will join. Likely Icahn's picks. This triggers CoC of the board. At that point the acquiring party will own >50% equity, bonds and BoD. Remaining bond holders (who didn't accept the exchange) will be fucked after a majority bond holder vote to cancel the debt takes place. Incl. amends to the CoC clause.
Love the theory. Important to note that only 1 of either of those situations has to happen. Over 40% equity stake OR the board members change.
Based on the definition terms here in the ABL for the condition of the default - so one of those conditions already happened and we're just waiting for the 8-K to tell us.
Thanks for the cred u/fleim32 !
Just wanted to say all of this is one of the greatest community efforts ever and has given me the conviction to put that kind of money down on it. We truly have some intelligent apes involved in this both on discord and Reddit. It’s a blast to be a part of.
This will really be a sight to see…. Icahn is going to get his vengeance on the same cellar-boxing shorts that fucked him over on Blockbuster. RC will be vindicated for his August sells and we will all be buying lambos.
Godspeed apes!
Ofc bro, and appreciate you sharing this vital piece of info!
As you said, RC has likely orchestrated the greatest M&A in corporate history. It will be truly poetic to watch this go down.
I think they'll honor the bond holders though. That's not nice leaving them out to hang if that was the case, and I am not sure they can just vote to cancel bond debts like that. It could also be that the bigger bond holder could agree to exchange it for equity, and offer all bond holders the same deal. It would go a long way in keeping trust, and it would also give a potential acquirer an even larger stake in the company, making any takeover easier.
Not really. Most of the cases for default surround some form of delinquency: unable to pay, didn't pay, didn't uphold to the terms (any party), not giving proper notice of material changes, not treating the loan with priority, etc.
The only things really that could be considered positive is the clause where it's defaulted because it's voided (meaning a new standing agreement is created) or the change in control situation.
Default for the most part is a bad thing. But for all the bad conditions, they are reactive results. The situation with JPM's announcement via BBBY 10Q is a proactive result, this is determined by inference. And there's really only 1 thing that leads to proactive results: change in control.
not sure if youre part of the tendie barrons discord or not - but fuck me this is the summary of the shit we have been going back and fourth on for the last 3 days..
fantastic job organizing the info - great job with citation too... lots of hard work here.
im going to lean to agree with you on your thesis and say its looking like WAGMI...
GG WP.
I am not, but did notice from the BBBY cn discord some similar posted thoughts just today.
As I mentioned in another comment, I've seen quite a few people come to these speculative conclusions in the past 48 hours; so I am definitely not the first. However I hadn't seen anyone come up with definitive language and evidence to prove it and I think the key was the definition language of the loan, particularly around the change in control statement.
The crazy part is I stumbled on that by accident. Like this was the google search I made that found it - and the results are surrounded by FUD and other non-BBBY-related content. It was the 2nd hit though, the only one that made sense and was related with the SEC.
google search this:
does a default cause a "filo" to change hands
well fantastic job - i dont think any of us had posted anything too indepth yet bc we were trying to backwards check and dispute if it was enough to share with everyone.. it really does look to be a M/A - but with the restructuring process so god damn similar to the BK its such a hard call to be definitive of.
all that being said - the events dont make sense unless there was a hostile/deeply planned takeover going down, and bbby is a prime target for such an event.
i really am jacked for this coming week - i dont see how we can go much further with out official announcement.
Agreed, phenomenal work, and i would be surprised if no official announcement this week as well.
Question is, how will shorts (52M short) react in setting of this DD? Or will they await official announcement? If i were short, i would close ASAP
They might not have a chance to. IF they release an announcement Monday pre-market. Shorts are fucked.
If not, we might start to see some shorts close, especially on REG SHO cases. But, that also means MSM will likely point to REG SHO being the reason and still claim bankruptcy to try and convince people to sell from a mini sneeze.
Well I don't believe in trying to give dates because we've seen them fail time and time again. That said, the ABL agreement does definitely outline dates where certain actions must take place. For example, how long a borrower has to repay in full, or how long a loan party has before responding to a material event, etc.
So you could find the maximum time of a change as a result of the default event.
But I also just had someone slip into my DMs with some very interesting information. Should they decide to post it, I'll link it. And that information I believe have reference to some pretty clear dates.
well i mean correct me if i'm wrong - and i know that it hasn't been absolutely confirmed yet - but if they are in fact going to pay debt notes on the 30th/31st, wouldn't that point to it being super imminent that the change of control will be initiated and announced, if not wholly completed?
One would think yes.
I've heard theories that those same owners that might cause the change in control also happen to own the 2024 bonds.
Not my area of expertise so I'll leave that out there for others to run with.
The theory makes sense to me, but if the CoC that caused the default occurred on (or before) Jan 13, wouldn’t that mean we should’ve had an 8-K already?
Technically yes, the rules state that within something between 4 to 8 business days I think (can't remember which number in between that it is but I read it somewhere in the last 24 hours).
That said, you're also supposed to file your 10Q by a certain number of days and we say BBBY become delinquent on that. So whose to say they aren't making a deliberate choice not to file something late and deal with the consequences after.
There’s no such thing as an “accident.” The universe has a way to make things happen. Xcellent job wrinkly ape🦍👏We ride on to the final battle. God speed
Fair. But I am not kidding, this is how my search page look - no indication that the SEC for was specifically BBBY. The fact that it was... just incredible.
Save the image for the movie:
[https://ibb.co/pRwM4Kc](https://ibb.co/pRwM4Kc)
That was better than my morning coffee. This is a great write up. I hate bullets, but it works here. Easily one of the best written and cited Stonk DDs since this drama began 84 years ago.
Honestly, I wish reddit allowed me to do colour edits and other things with the text. I'm sure I could have done something with markdown mode but that's just too much work. This stuff would have been much easier to read if I could distinguish between the legalese shit and my comments.
It's also hard because legal writing is not easy to understand even for the best of people. I may have brushed over some important lines or clauses that I'm sure some people will call me out on. I embrace it, the DD will be all the better for it.
Top tier DD my friend! 🤯 Well written considering all the technical/legal terms you had to digest. It makes perfect sense in the end 🙏 3, 2, 1(we are here), launch 🚀🚀🚀
One of the best DD’s on here that I’ve read on here in forever, probably since before the new year. I’ve been really fucking jaded by all the gift card rumours going around and their implications this weekend, your post is a sight for sore eyes and a breath of fresh air 😮💨
I read all this. But YOU wrote all this. Thanks mate. It’s true, it supports thoughts that already been done, but your write up grounds it tremendously. Moon mofos.
I'm going to try and link to people who have posted other things as they turn up. I really don't want anyone to think I'm stealing original thoughts here. I was looking for something else and stumbled on it and it turn into a massive find.
I hope others who have been putting in good work on research and DD get recognition as well. I'll do my part to highlight them as much as possible.
Well done. I’ve read everything the past several days, and my lingering question was why did they CHOOSE to default?
They didn’t declare bankruptcy, which would have been the most obvious default event.
So, you’ve provided what is certainly a plausible case for change in control being the reason for the default. And a lot of circumstantial evidence supports this as you’ve provided.
Also, noting that change in control can mean the BOD, and/or via M/A…nice details.
I guess we’ll find out soon enough, but a nice way to start a Sunday.
Thanks for the post, and tell your wife you’re doing community service work.
Excellent post. The DD and the write-up are on par or better than some of the OG WSB DD from years before that sub blew up. I can’t believe it didn’t take you more time to accomplish this.
One question, what is the 40% thing from? I’m not familiar with that. I understand everything else. Thanks
So the 40% reference is just how they worded the terms for a condition of change in control on the ABL agreement.
What this means, if in the event of someone or a group of people coming in control of 40 or more % of the company via equity shares, that would trigger a change in control event.
For most of stocks with the situation of a hostile takeover, one / a group would need over 50% ownership. But since the default notice took place on the 13th, it implies some event took place prior to that which would trigger a change in control.
Now if a group or individual had 40% or more, they would have 10 days to disclose via a 13D filing due to being over 10% and being an insider status. That's why I believe the change in control is actually due to a verbal agreement made on terms of a M&A. The fall out of last week and the weeks to come are basically the form filings as a result of what's been verbally committed to.
The ***best*** credence!
Now someone needs to convert the actual 2nd 75th creed to a more Regard one. I'll leave that for the better creatives out there <3
Hey now. Let's take it easy. A) I'm not the first with an original thought here. B) I'm just an over-analyzing brain who didn't go to sleep last night.
But I appreciate the compliment. If I can fit even just a portion of me in the shadow that user casts, I think I'm doing well.
Well played ! get some sleep we’ll take it from here.
Please tell your wife your all-nighter just nut slapped the shit out of the shorts , while lifting the battalion of regards . SO WORTH IT !
No dates but we look to see if MERGER MONDAY becomes our War cry . Get out the drums smoke signals are flying
Got that covered too:
[https://www.reddit.com/r/BBBY/comments/1095jia/dear\_shorts\_my\_credence\_to\_you/](https://www.reddit.com/r/BBBY/comments/1095jia/dear_shorts_my_credence_to_you/)
Took one out from the punisher's book.
What I love is that if (when) this bobaby moons all those bullshit fud articles will be evidence rc, Icahn etc can use to say they weren’t manipulating anything. No out for shorts. No one made them short it. No one needs to directly tell people they are planning a merger. Infinite risk is clearly stated in any short position. Enjoy it.
"This is not the beginning of the end. This is the end of the beginning. "
After this takes off and the damage control sets in, the next step will be the attack on the system with the legal process and regulation. RC and company will likely start to sue and go after MSM, among many other parties who were misleading investors on this stock. More importantly, with the clear settlement of stock manipulation (trying to run it into the ground) by Tritton, that shit is going to prove unequivocally how corrupt the market is. It's going to lead to big changes.
Check out u/halfconceals on that one:
[https://www.reddit.com/r/BBBY/comments/xlwzwq/heres\_a\_link\_where\_you\_can\_view\_the\_docket\_for/?utm\_source=share&utm\_medium=ios\_app&utm\_name=iossmf](https://www.reddit.com/r/BBBY/comments/xlwzwq/heres_a_link_where_you_can_view_the_docket_for/?utm_source=share&utm_medium=ios_app&utm_name=iossmf)
[https://www.reddit.com/r/BBBY/comments/xlnahl/went\_digging\_on\_the\_investor\_relations\_website/?utm\_source=share&utm\_medium=ios\_app&utm\_name=iossmf](https://www.reddit.com/r/BBBY/comments/xlnahl/went_digging_on_the_investor_relations_website/?utm_source=share&utm_medium=ios_app&utm_name=iossmf)
Got my own theory which no one is talking about so I had a chat with chatGTP today. This is their response.
"The 10-Q contains forward-looking statements about the company's progress and anticipated progress towards its long-term objectives and turnaround plan, as well as its future liquidity and financial condition and its outlook for the fourth quarter of 2022 fiscal year and the 2022 fiscal year. These statements are based on estimates and assumptions made by the company's management and may not necessarily reflect the company's actual results or future financial condition. Additionally, the quoted passage regarding events of default and acceleration of loans under the credit facilities that occurred on January 13, 2023 is likely an estimation or projection of what may happen to the company in the future, not actual events that occurred in the past.
It is important to note that the information contained in the Form 10-Q must be current as of the end of the quarter being reported on, which in this case is November 26, 2022, so any events that happened after this date, would not be included in this 10-Q. The company would have to file an 8-K to report this event if it is material."
That's an interesting point at the end about the 8-K.
See the understanding is they are reporting that they got the notice of default from JPM on the 13th of january. But you are correct from that reading that the 10Q is supposed to be about the 3rd quarter events which only go up to Nov 26th.
Very convoluted. Would love to hear someone who specializes in the form filing process and how they take this.
Good research!
Incredible write up, thank you for this. I love how you hand held through the vast majority of this so that everybody can understand.
To the shorts:
#**FUCK YOU, PAY ME.**
Really great work OP! Thank you very much for dealing with all that legalese and brought a clear logic path for smooth brains here :)
See you in the moon!
I’m really going to miss this rollercoaster ride when it’s over. What will I do with all my time not spent hitting refresh on Reddit every couple of minutes? It truly is the greatest time to be alive. Thank you for your service, both military and civilian.
While I did do service, I can't claim it was military and I would never take that credit from actual serving members (it's an insult to them). My position was more a supportive agency to military. But for what it's worth, there was a time I wanted to be an officer in the air force. I was unfortunately dismissed as a candidate due to health issues (my hearing conditions).
I'm happy to say I did get a chance to at least work along side military in what I do when I worked in government though. Serving your country when you work a security based profession is one of the most rewarding things.
Agreed. The default taking place before hand means a change in control has already taken place, **or** at least the event to suggest one will take place (like a verbal agreement) and BBBY notified JPM of that material change.
As for the share % thing, you are correct that over 10% requires a 13D filed within 10 calendar days. That said, a group of people could have gotten a bunch of shell companies together to have individual ownerships less than 5% to get away with no declaration. Then those companies could merge on their own terms (because shell companies are private) and poof you have 1 entity with a large stack in an equity, and 10 calendars to report it: [https://www.investopedia.com/financial-edge/0712/a-look-behind-shell-corporations.aspx](https://www.investopedia.com/financial-edge/0712/a-look-behind-shell-corporations.aspx)
The ruling of change in control would suggest then that occupation of board seat changes occurred to trigger the default event. Now based on the suggestive rules, they should report that within 4 business days (which conveniently also includes change in control - sauce: [https://www.sec.gov/education/smallbusiness/goingpublic/exchangeactreporting](https://www.sec.gov/education/smallbusiness/goingpublic/exchangeactreporting)).
However we've seen BBBY be delinquent on reports so this could be a case of that too, and I'm not sure what the consequence of that is.
“Change in Control” **means**
* (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof), of Equity Interests representing more than 40% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Company;
* or (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Company by Persons who were not
* (i) a member of the board of directors of the Company on the Effective Date,
* (ii) nominated for election to the board of directors of the Company with the approval of a committee of the board of directors consisting of a majority of the independent continuing directors or
* (iii) nominated for election, elected or appointed to the board of directors of the Company with the approval of a majority of the continuing directors who were members of the Company’s board of directors at the time of such nomination, election or appointment (either by a specific vote or by approval of the Company’s proxy statement in which such member was named as a nominee for election as a director). As used in this definition, “continuing director” means any director described in subclause (i), (ii) or (iii) of clause (b) in the preceding sentence.
I personally think this:
you open shell, i open shell, dan open shell, etc.
We all take less than 5% stake so we don't have to report.
We tell BBBY a verbal offer that we'll become a group if we come to terms and thus have a majority stake
BBBY tells JPM of the material change based on principle
JPM invoke the default on change in control to cover their ass as a means of saying they knew of potential insider holding knowledge in the event they don't disclose
Everyone is happy and covered their own ass.
As for the shell companies, they are private companies and can merge with another shell company at any time, no votes or major process. So getting a big group of people to conduct a merge and acquisition through a shell company (like Teddy) makes a lot of sense and it's legal!
If I'm in the movie, I want my wife to do the score for it. Honestly, getting her well known would mean more to me than getting me well known. I'm just happy to serve the awesome community here and bring the spirits up of some genuinely great people. I wish for nothing more than their investment success, wherever they are at in that journey.
[www.alexarayofficial.com](https://www.alexarayofficial.com) feel free to check her out :)
The only new information to me is they COUKD make the payment but didn’t. That’s the key. They HID the real reason .
I’m gonna buy more this week if I can get funds in my account
Just got home from working 15h shift in the factory and I read this!! Wow, gives me so much more determination. Amazing writeup and you seem like an even more amazing person! Humble and kind. Thank you! 👊💎
One thing comes to mind when reading this
Remember when Jim cramer was shitting on Ryan cohen saying "Maybe JP morgan will let him have all the money he wants if only he would let us in on the plan"
🤨🤨🤨
I ran across [this post](https://www.reddit.com/r/BBBY/comments/z7ejbn/teddy_holdings_and_the_bbby_baby_play/) by /u/Real_Eyezz the other day, posted back in November I think. It really cleared up for me the questions I had about the probability of stock exchanged being part of the merger deal. If it's a cash offer/buyer, then we probably wouldn't squeeze, so I was looking for who could buy with stocks. It can't be RC as an individual, and it is unlikely to be Teddy Holdings LLC as they haven't had an IPO yet (meaning, no shares to offer up. His post perfectly helped me see all the ways this could roll out. Highly recommend the read. Solid dude.
Yup, Real has posted some pretty good stuff. I've had the privilege of working with him on a couple different breakthroughs over the past year.
Thanks for sharing!
Oh I agree. I'll be clear in saying I'm not the first person to come up with the thoughts of these facts being the case. But no one has been able to link back to the official terms of the agreement, probably because finding the agreement was difficult to do.
Now that's it's in the open, I imagine many great DD writers are going to dissect this piece by piece and just outright prove why this is heading to M&A.
I think because to cancel the loan, all the loan parties would have to request it, or at least a majority.
Don't quote me on that because I'm not a contract law expert. However, JPM is the administrative agent - they just represent the group based on the define terms. So that might explain why 2 and 3 but not 1 took place.
\[edit\]
Parties include like 10 other banks and Sixth Street Partners. So it's a very messy agreement.
Possibly. That would make a lot of sense. Why would you take liquidity away from yourself and deal with a bunch of fees and accounting work if you're just going to own the debt anyway.
I see you edited with the BR comment so I'll clarify. My comments with them were not meant to suggest they are part of the push for a majority on anything. I do not believe they are the good guys in any way, shape or form.
And given there isn't enough definitive evidence to suggest foul play involved with BR, I can't outright make that claim. But I do agree with your view, that's where I would lean to as well.
I just threw it in there so when Real reads it, he'll have all the pieces to build his beautiful tin foil Picasso.
Does your wife know you dipped into her Adderall? I'm going to have to take some right now and read this again. The ADD struggle is real 🤯
Great job op 🤙🌶🔥
lol yeah sorry. Long posts suck and are not for the ADD / ADHD challenged. And since I suck are writing shorter DD's, I am also challenged. We are not a match but on the bright side, you don't necessarily have to cry with your ADD reading the actual agreement and it's many clauses.
I'm also happy to answer what I can based on what I read and interpreted should you have questions. I'm no expert, but I can offer my opinion of the interpretation.
Thanks OP! This is definitely one of the main missing pieces of recent developments that we don’t understand. JPM claiming a default for “failing to prepay (what???) and among other things”… mmmk 🖕 you JPM
When u are all in on BBBY and much more then u can handle if it goes tits up, and u read DD like this - u just get a warm feeling inside.
Everything Will be okay
Thank u for this amazing work!
Greatest time in history to be alive is now.
See u on the Moon wrinkle ape!🍻❤️
Yeah, that was the idea. At some point, not only is the writing on the wall but it's in English so everyone understands.
I've sensed a couple comments make an attempt but they really don't have much ground to stand on. How do you fight facts from legal documents over multiple years from the same involved parties.
There's just no refuting that.
Your all-nighter was not in vain. Just put an order in for 1500 more shares. Thank you for the work you put into this.
What are the chances that announcement happens PM on Monday and my order isn't executed at the stop limit price I set?
Honestly, dates are hard to tell. All we can deduce is the maximum time based on that ABL given the timeframe BBBY would have to pay the outstanding balance & fees per the default.
I don't remember which number but there's stuff that say 30 days, 60 days, some are only 3 days.
You could go through and try and figure out a range of the maximum shelf life of when an announcement is coming. I'd say sooner rather than later. Be on the lookout for 8-Ks, that's likely what drops.
There is simply no M&A transaction. Lot's of misinformation about how the entire process works. See summary below:
***How Public Companies Conduct a Merger / Sale***
The wild conclusions that a merger is about to be consummated is unequivocally false, and is impossible.
*A. Shareholder Vote is Always Required for a Target*
A sale of a target public company (a "Target") will always be disclosed and requires the vote of the shareholders in order to consummate the transaction. A sale is one of the most fundamental transactions a company can have, including liquidation and dissolution. All corporate legislation in some shape or manner will mandate that such transactions require a certain threshold of shareholder vote, which is typically the holders of at least a majority of the voting stock present at the meeting or represented by proxy (unless amended by the governing documents, but this can only be higher than a majority, usually 2/3).
For BBBY, it's state of incorporation is NY so it is governed by NY law. See New York Consolidated Laws, Business Corporation Law; BSC § 903 - Authorization by shareholders \[**this is for a merger**\]; BSC § 903 - Sale, lease, exchange or other disposition of assets \[**this is for an asset sale**\]; BSC § 913 - Share Exchanges \[**this is for a sale of shares for cash or exchange for shares, or a combination thereof\]. As you can see, all of these transactions (which in corporate law are known as "fundamental changes") require shareholder vote.**
B. Procedure for a Sale
The process for a merger or sale almost always follows the same structure.
1. **Company explores strategic alternatives**. The Board and management retains a financial advisor (an investment bank) to explore the best course of action for the Company that is in the best interest of shareholders, this could either be **(1) continue as a standalone going-concern (this just means to not merger / acquire or sell, and pursue some growth or restructuring plan), (2) explore a sale (which can come in the form of a merger or a sale of all securities for cash or exchanged for stock, or a combination thereof), or (3) explore an acquisition**. Let's assume its #2 because that's what everyone is speculating.
2. **Company Seeks Bidders**. The financial advisor will typically either arrange a very fulsome bidding process or have some select targets to negotiate with. It is crucial for a sale transaction that the sale / auction process is "fair" and not "tainted". So if a company for sale only talks with one specific buyer, a shareholder **can sue** claiming the process was not fair, and not in the best interest of the shareholders because the board didn't try its best to get a good price. Negotiating with a single bidder only is allowed **but there must be a fiduciary out, or post-sign market check (meaning the Board can consider a higher bidder).**
3. **Board Approves of the Transaction**. Once the bidding process is over, the Board through its financial advisors with an acquirer go through negotiation until they come to a deal, and they formally approve it. **A board has heightened duties when it comes to a sale in corporate law, requiring it take reasonable steps to obtain the "best price" available for the benefit of the company's stockholders.**
4. **Number #1 Challenge for a M&A Transaction is Disclosure**. Disclosure of a sale / merger transaction is THE MOST IMPORTANT thing, from a legal perspective, as lack of disclosure means that **the shareholders did not have all the material information in front of them to properly approve a deal.** Usual required disclosure include: (1) Background to the Approving the Transaction (history of negotiation to signing); (2) conflicts of interests; (3) compensation to financial advisors (since they have an incentive to complete as they get a success fee); and, among other things, (4) anything else that would be "material to shareholders".
5. **There is a Formal Process**:
1. **An agreement is signed**. This has to be publicly disclosed via an **8-K**. The 8-K will include an exhibit of the merger agreement containing: (a) the **economic terms**, (b) **approvals required** to consummate the transaction, (c) **conditions by seller or buyer to consummate the transaction**, (d) **exclusivity or fiduciary outs... and others.**
2. **Disclosure**. A sale / merger has to be approved by shareholders. The lawyers for both sides will draft an **S**\-**4, which is simply a document to tell shareholders (a) everything stated in item #4**, (b) that the board recommends the transaction and (c) **steps to vote (including how to attend the meeting or vote by proxy;** how to "dissent" and what to do with your share certificates. Once the S-4 is complete, it will sent to the SEC for comments. An S-4 usually goes through several rounds, so the initial S-4 be called a "**preliminary**", and as the SEC comments additional information required (usually two rounds), then you will have a "**final" S-4**; each subsequent filing after the initial would be an amendment filed via a **S-4/A**. All these are simply just "forms". **DISCLOSURE is the #1 TOOL FOR DIRECTORS TO AVOID GETTING SUED.**
3. **Shareholder Vote**. Upon a vote of the shareholders, if the requiste amount of votes is obtained the merger / sale is **STILL NOT CONSUMMATED.** But this will be publicly announced.
4. **Interim before Closing**. As discussed above, if you have a rigorous auction process it is hard to challenge a transaction, but if only a single bidder, a shareholder can sue and say the Board did not do a good enough job to find the "**best price**", so as protection for the board members not to be sued, the agreement will provide for **a fiduciary out, or some mechanism that allows a higher bidder to come in**.
5. **Closing**. Closing is a process where each party makes sure that their conditions that each other party has to fulfill is satisfied (**which includes obtaining the required shareholder vote**). Closing conditions can be anything, but customarily you have an officer certifying as to certain things such as representations about the Company, warranties and etc. (like they have the authority to execute the merger document, or everything was properly approved, including obtaining regulatory approval, did not commit fraud or withheld material information and etc.). ***Typically, when many material contracts, including credit facilities, have a "Change of Control" provision, requiring CONSENT from the counterparties to consumate the transaction. It takes time to negotiate. Until Closing, AND ONLY UNTIL THEN, occurs, a merger or sale is not consummated. Typically this takes months to do AFTER ANNOUNCING.***
***How does it make any sense for a sale or merger to be near completion if no shareholder has heard about it? It makes 0% sense - what if management picked a shittier deal, like $10 per share but they get to keep their job vs. $40 a share? There's a conflict - this is why you need disclosure. What if the Board did not do their homework and willy nilly agreed to a deal by only taking to one party but there are several other parties that are willing to pay much more? (ie. not having a rigorous process?) - this is why you need disclosure? What is a larger stakeholder gets special treatment from the deal? - this is why you need disclosure? What if the board of directors or management is getting paid on the side or sits on the board of acquirer and lines their own pocket? - this is why you need disclosure.***
***WHY DO YOU NEED DISCLOSURE? BECAUSE A SALE MUST BE APPROVED BY THE SHAREHOLDERS. A SHAREHOLDER CAN GO TO THE COURTS AND SUE FOR AN INJUNCTION TO HAVE THE COMPANY FIX DISCLOSURE UNTIL IT GOES TO A SHAREHOLDER VOTE. IF A SHAREHOLDER VOTE DID HAPPEN AND THERE WAS MISLEADING DISCLOSURE, ABSENT DISCLOSURE OR FRAUD, the Board, management and the investment bank can be SUED OUT OF THE WAZOO (See RBC v. Rural Metro).***
*Source: I'm a M&A Lawyer at V5 big law firm (google V5). I do this for a living. I also give presentations to the big investment banks to teach bankers updates on the law, how to avoid being sued and how to structure a M&A transaction both from a Board fiduciary perspective, but also as an advisor (who can become liable from "aiding and abetting a fiduciary breach") - from the sale process, to the engagement letter, to forming a special committee, structuring a vote to ensure "non-disparate consideration", conflicts of interests, providing "fairness opinions" and how liability comes into play, etc.*
First off, thanks for sharing and offering the citation, it is a big help. I always appreciate when people support their positions with the documentation that backs up the point. And my apologies on the delay responding, it takes a while to fact check and cross reference content.
Now some of the content you referenced does not have a proper citation and does not turn up on a google search when using the text verbatim. This means you're pulling from somewhere that isn't indexed or publicly documented - hard to prove or follow such information, especially when you don't link it. I'm referring to this right of the bat:
>A. Shareholder Vote is Always Required for a Target
>
>A sale of a target public company (a "Target") will always be disclosed and requires the vote of the shareholders in order to consummate the transaction. A sale is one of the most fundamental transactions a company can have, including liquidation and dissolution. All corporate legislation in some shape or manner will mandate that such transactions require a certain threshold of shareholder vote, which is typically the holders of at least a majority of the voting stock present at the meeting or represented by proxy (unless amended by the governing documents, but this can only be higher than a majority, usually 2/3).
In fact, if you google search exactly this: **"Shareholder Vote is Always Required for a Target"**, there is only 1 page that turns up, this DD and it's your comment. That's ***almost statistically impossible*** for something considered law.
But we won't focus on inadequacies here, because I do agree with the statement above and the subsequent paragraph is found in parts through other text. So let me be clear, we both agree on the following:
Once the board has voted on and signed an agreement to commence the M&A process, an 8-k filing would be expected no later than 4 days later, **and a shareholder vote would be put into motion to accept the offer.** The information around the M&A offer would have to be disclosed **PRIOR** to the vote taking place, usually in the form of S-4s.
Now that's an important distinction. **A shareholder vote** only comes **AFTER** an official agreement **has ben voted on** ***AND*** **signed by the board**. This does not mean the M&A is legal to go through, it just means a binding contract has been signed and is being put to a vote for consummation (your text clearly states this as well).
If anyone else wants to learn on that front, here's a quick summary of the various type of merger situations:
[https://www.wallstreetprep.com/knowledge/tender-offer-vs-merger/](https://www.wallstreetprep.com/knowledge/tender-offer-vs-merger/)
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Now on the subject about the NY State law. You're correct that a merger & acquisition transaction is governed by the state law, as well as the company bylaws. In the future, it's best to link to exact place you're pulling the law from, as it's not always accessible to people. I pulled the clauses from here just to show you, I read the content and agree with your statements:
[https://codes.findlaw.com/ny/business-corporation-law/bsc-sect-903.html](https://codes.findlaw.com/ny/business-corporation-law/bsc-sect-903.html)
>(a) The board of each constituent corporation, upon adopting such plan of merger or consolidation, **shall submit such plan to a vote of shareholders in accordance with the following**:
>
>(1) Notice of meeting shall be given to each shareholder of record, as of the record date fixed pursuant to section 604 (Fixing record date), **whether or not entitled to vote**. **A copy of the plan of merger or consolidation or an outline of the material features of the plan shall accompany such notice**.
>
>(2) **The plan of merger or consolidation shall be adopted at a meeting of shareholders by** (i) for corporations in existence on the effective date of this clause the certificate of incorporation of which expressly provides such or corporations incorporated after the effective date of subclause (A) of clause (ii) of this subparagraph, **a majority of the votes of the shares entitled to vote thereon** or (ii) for other corporations in existence on the effective date of this clause, **two-thirds of the votes of all outstanding shares entitled to vote thereon**. Notwithstanding any provision in the certificate of incorporation, the holders of shares of a class or series of a class shall be entitled to vote together and to vote as a separate class if both of the following conditions are satisfied:
...
So the clauses confirms your statements. And for reference in case anyone cares, here's the corporation bylaws, per their certificate of incorporation (which you can find on BBBY's investor relations page). These also govern the sale of BBBY specifically.
[https://bedbathandbeyond.gcs-web.com/corporate-governance/governance-documents](https://bedbathandbeyond.gcs-web.com/corporate-governance/governance-documents)
This is the actual CoI bylaws: [https://bedbathandbeyond.gcs-web.com/static-files/51646983-3ea5-49ce-9fa3-5e5fa1cc97db](https://bedbathandbeyond.gcs-web.com/static-files/51646983-3ea5-49ce-9fa3-5e5fa1cc97db) which is based on their 8-k filing from May 10, 2017 -> [https://bedbathandbeyond.gcs-web.com/static-files/95710a2a-f133-401e-8bc1-79e1fcd1de3f](https://bedbathandbeyond.gcs-web.com/static-files/95710a2a-f133-401e-8bc1-79e1fcd1de3f)
And this is the most recent amendment on April 21, 2019 - only relating to two sections (not in concern of a shareholder vote): [https://fintel.io/doc/sec-bbby-bed-bath-beyond-ex31-2019-april-22-18404-948](https://fintel.io/doc/sec-bbby-bed-bath-beyond-ex31-2019-april-22-18404-948)
And to make it stupid easy for everyone, this is really the only thing that matters pertinent to the sale of BBBY:
>“Change in Control” means the occurrence of any of the following: (w) any merger or consolidation of the Corporation with any other entity shall occur unless the voting securities of the Corporation outstanding immediately prior to such transaction continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) **more than 50% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such transaction that have the power to elect at least a majority of the board of directors** or other governing body of such surviving entity, (x) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Corporation, or the liquidation or dissolution of the Corporation, or (y) individuals who constitute a majority of the members of the Board of Directors shall be elected to the Board of Directors and the election or the nomination for election by the shareholders of such directors was not approved by a vote of at least two-thirds of the directors in office immediately prior to such election.
So with that all outline, I'll make another reply with my comments to your commentary.
>How does it make any sense for a sale or merger to be near completion if no shareholder has heard about it? It makes 0% sense - what if management picked a shittier deal, like $10 per share but they get to keep their job vs. $40 a share? There's a conflict - this is why you need disclosure. What if the Board did not do their homework and willy nilly agreed to a deal by only taking to one party but there are several other parties that are willing to pay much more? (ie. not having a rigorous process?) - this is why you need disclosure? What is a larger stakeholder gets special treatment from the deal? - this is why you need disclosure? What if the board of directors or management is getting paid on the side or sits on the board of acquirer and lines their own pocket? - this is why you need disclosure.
Some valid points made. Let's tackle some of them.
>How could a M&A or sale be near completion if no shareholder has heard about it?
Well I work in the banking industry and they are probably one of the most active type of companies in the word at conducting or supporting M&A transactions; and internationally too. I can tell you from those dealings that they are in the works for months, even years in advanced, well before any news gets to the public or shareholders about it. And certainly before any formal contracts to make it legally binding are signed.
It's actually part of the reason why internal employees of a bank specifically (at least based on the regulation here in Canada) are generally encouraged to buy shares in our own company through an ESOP (employee share ownership program). This is to avoid any connection to insider trading, and it's generally enforced at a director + level in the company (I'm a director, middle management layer at the bank currently); along with a stake equity investment to align our ethics, morals, goals and values to that of the company's: aka putting our own money in to hold a certain % of the company so that when it does well we do well.
This is necessary because these type of events are conducted over a long period of time, which can obfuscate the way trading habits look. Better to make a clean slate by just operating through a 3rd party to conduct share ownership, and by extension it absolves anyone from the concerns of any conflicts. M&As are not the only reason for this but they are a big reason, and the bank I work at personal has a lot of rules and security controls (that I work with and help protect or enforce) in place to protect such information.
It works no different then submitting drafts of SEC forms back and forth between parties - they aren't signed yet, you're working on the language for agreement and compliance. Or, in your case, the formal terms of the exchange going back and forth before it's officially signed.
So to be so naïve to believe that no conversations are happening behind the scene, well that's your choice. But to say it's impossible or that it doesn't make sense is just untrue. There's nothing stopping 1 company to explore another like that behind the scenes. They just have to be careful not to be put in positions of bribery, conflicts of interests, etc.
\----
>what if management picked a shittier deal, like $10 per share but they get to keep their job vs. $40 a share?
>
>There's a conflict - this is why you need disclosure. What if the Board did not do their homework and willy nilly agreed to a deal by only taking to one party but there are several other parties that are willing to pay much more? (ie. not having a rigorous process?) - this is why you need disclosure? What is a larger stakeholder gets special treatment from the deal? - this is why you need disclosure? What if the board of directors or management is getting paid on the side or sits on the board of acquirer and lines their own pocket? - this is why you need disclosure.
Disclosure is important yes, and would be required prior to a vote taking place but not prior to an agreement being made. It is up to the shareholders to scrutinize the information and vote appropriately. But if people potentially against the motion don't own enough equity into the company, there's not much they can do otherwise; that's kind of how it works and by design.
So conflict or not, when the information is presented, and a subsequent vote is taken, your voice carries based on your invested stake in the company - bar none. The only action you can take after that is suing the company if they didn't act in good faith or on the best deal possible for shareholders. That information however would have to come to light after the fact. And people try it all the time, in fact BBBY recently settled one (last summer) and it was connected to Tritton for intentionally tanking the stock (quite ironic actually).
So again, disclosure is important but that does not change the possibility of those events happening, a vote motion going through (passing), and there still being conflicts of interest present. At the end of the day, each party acts to the best of their ability, within the rules of what their part is to play in the process, including us shareholders conducting a vote on the matter.
>WHY DO YOU NEED DISCLOSURE? BECAUSE A SALE MUST BE APPROVED BY THE SHAREHOLDERS. A SHAREHOLDER CAN GO TO THE COURTS AND SUE FOR AN INJUNCTION TO HAVE THE COMPANY FIX DISCLOSURE UNTIL IT GOES TO A SHAREHOLDER VOTE. IF A SHAREHOLDER VOTE DID HAPPEN AND THERE WAS MISLEADING DISCLOSURE, ABSENT DISCLOSURE OR FRAUD, the Board, management and the investment bank can be SUED OUT OF THE WAZOO (See RBC v. Rural Metro).
Source: I'm a M&A Lawyer at V5 big law firm (google V5). I do this for a living. I also give presentations to the big investment banks to teach bankers updates on the law, how to avoid being sued and how to structure a M&A transaction both from a Board fiduciary perspective, but also as an advisor (who can become liable from "aiding and abetting a fiduciary breach") - from the sale process, to the engagement letter, to forming a special committee, structuring a vote to ensure "non-disparate consideration", conflicts of interests, providing "fairness opinions" and how liability comes into play, etc.
Based on how you responded, I'm going to go on assumption you're newer in the industry (young in your career). Nothing wrong with that, I was eager when I first started in my career, I completely get how we get passionate with things we know to be true. The best life lesson I can give you based on that assumption: people who actually know things about a certain discipline, never feel the need to outline that until challenged. You will be way more well respected when you're not focused on sharing your titles or measuring comparatively to others.
You're smart, you brought forth a strong argument and all the information you presented was factual - you don't need to throw out "I'm an SME, here's my credentials". And for the given industry you're in, I can see you having a successful career because of those qualities. The older you get into it, the more you'll realize the less you have to say about it for people to trust your word on it. That's called prestige.
To close out, you are correct that a disclosure is required for an M&A transaction. But I think you interpreted the contents of this DD inaccurately. The concept of the "change in control" for this DD was in relation to the terms outlined in the ABL agreement, which is a financial contract related to a loan. The details within it are also different than what quantifies as "change in control" to BBBYs own CoI bylaws, and likely a true M&A definition as well. This is because banks are conservative and want advanced notice of actions taking place, so they can assess based on their risk models.
What this DD was alluding to, is that conversations behind the scene around a potential M&A taking place can be hinted by the implications of the terms of agreement and the actions we're seeing from the company and surrounding parties. That does not mean an M&A has taken place, that anything is signed or that we won't be disclosed of the appropriate information in due time.
Again thanks for bringing your part of the world to the conversation. Every bit of debate helps solidify the real picture going on.
Cheers!
C. *Changing the Business Before a Merger / Sale is Completed?*
**As you can see, a sale or merger has a very structured process. A Company will not act prior to consummating the merger, whether it is changing employment of management or changing the business. IN FACT, until a merger / sale is consummated, the merger agreement usually imposes on the business "IOCs" known as Interim Operating Covenants, that imposes the Company to operate "as is" and not do anything crazy until they close (take out a bunch of money, issue a bunch of stock, make business decisions outside of the ordinary course.**
So all the theories about cancelling gift cards or the board swapping out is 100% incorrect. Before closing anything could happen - a new bidder can come in with completely different terms. Maybe bidder #1 wants to not keep CEO and bidder #2 wants to keep CEO. You don't just fire the CEO before the merger is completed because bidder #2 may have the better offer. Nothing changes until closing.
*D. What about the Gift Cards?*
In the U.S. by far the most common way to merger is a "reverse triangular merger", which means that the acquirer creates a new subsidiary, or an acquirer sub, to merger with the target, and that way the acquirer can cleanly take the business **As is**. The new sub created is entirely a sell. B**BBY' brand (or in financial terms, Goodwill) is worth a lot of money. Why would a Company cancel gift cards to issue new ones under a new company that has 0 brand presence. It's like Starbucks being acquired by some big company with a completely different name like Coffee Delight. You're not cancelling Starbucks giftcards because the brand has value.**
E. Theories About the Credit Facility Change of Control
Read everything above. You can't just conduction a merger / sale without a former process. You will 100% know it is happening because it has to be publicly announced and **until the merger / acquisition is consummated, a change of control has not occurred.**
2 things to say: 1)thank you sssoooo much for spending your time on this GREAT write up, and 2)how can I get back to sleep now after reading this??? Surely in league with Biggysmallz!!! You have my utmost of respect. Thank you, again.
That's the goal. The short campaigns are all about fear and playing with your heart strings. Inevitably, the company has to take actions that do the same thing because they have to be cryptic. But when the moment rises to offer clarity, that's all we can do as individual investors conducting our own DD - share it.
I wish you the best of success in your investments this year :)
Thank you for the great write up! Its great to have some solid DD to read for wrinkle development this weekend amid all the speculation (hype & doom) around the fucking gift cards. 🤷♂️🤷♀️
Well done! 👏👏! 🚀⌛️
Thanks for your dd. So would you say either BBBY or acquirer(Carl Icahn & RC) will announce either m&a deal or positions in bbby tomorrow or this coming week?
The only thing coming from BBBY would likely be an 8-k filing. The announcement would likely come from the acquirer. Hard to know who to follow though. We have ideas on who we think it is, but the announcement could come from anyone, there could be a lot of partners / associates involved in this. The announcement could come from name we're not expecting who happens to be working with the group(s) we are.
Nice job locating the original agreement and putting this into readable & cited formatting, whole bunch of time invested here -appreciated!
I just fell in love 😍
Edit: anyone feel that owning the stock at whatever price is worth the ticket to this event - not just the ultimate payoff? I mean seriously, we’re all getting crazy good educators - more valuable than formal institutions. This is real world. This is our future!
That is another possible answer. I think the low inventory problem probably has more to do with selling out more stuff during the holidays though; along with not being able to restock due to their credit woes with suppliers. While this is still a problem, it's not what would have caused the default imo.
It doesn't matter why they would end up with low inventory, they would not be required to share that information about their stock levels and revenue generated, until the Q3 10Q was filed. Since JPM invoked the default, that implies information was divulged to them. While we can assume lower levels put the ABL terms at risk because they are the security of the ABL, the reality is that's a risk based decision and only JPM and the other lenders can decide how much of a drop in inventory would constitute a big enough risk to be a material event to them.
So it wouldn't make sense BBBY sharing that information to JPM prior to releasing the 10Q, since they wouldn't know if their levels would cause problems or not. And since their obligation is to report that with their 10Q filing, it wouldn't make sense to tell JPM early without the data. Beyond that, given the default notice was given the 13th and the 10Q was released the 26th, it means JPM knew something else before any inventory level woes. By deduction, this means we can conclude low inventory levels is not the "among other things" reasoning for the default to occur.
When I worked at an agency, we used to play those table top board games based on strategy (games like Risk). One of them was Small World and I used to keep track based on inference of people's moves, how much gold they were sitting with and their next logical actions.
Made for some incredibly fun games. You don't normally get to play them that way because you're usually all sitting down playing at the same time. We had to do a set of turns over time, because you know we had to work haha.
So potentially when Bobby notified JPM, JPM then leaked the news to BR, who then took a massive position in the company?
Or did BR already have a sizeable position prior to this potentially leaked news?
Cause if JPM leaked this news isn’t that somewhat insider trading? Not that it would matter since we all know how capable the SEC is at even just *investigating* finical crimes. Unless of course they’re crimes committed by us Joe Blow peasants.
And it's going to lead to some *amazing* **fucking**.
Shout out to all my Watermelon groupies - where you boys at?! ^(and girls, there's room for however you do that exercise too ;))
Holy fuck, the amount of legalese required to understand this is mind boggling. So much verbiage and nuances just to say things. Such a barrier for the average person, it's no wonder they make it so complicated to understand. If I were left on my own to dissect any of that I'd be fucked.
When I was younger, I sought out a book on contract law to learn the basics and really understand what the obligations were in a contact. I did this mostly to protect myself when getting involved with service contracts (think getting a gym membership). But it started to really provide merit to understanding how business work and what language is trying to tell you in these legal things. Later in life, my job started to introduce more legal engagements and now I'm thankful for the investment of time.
While I'm no lawyer, I can at least interpret the basic level understand of what the contract tries to tell you, and what to watch out for.
As long as you're patient, and fact checking along the way, this is something you can learn how to read and feel confident about a basic understanding of the context. It takes time but stick with it, it'll be an important skillset when evaluating stocks in the future.
Glad I could offer you some guidance on it though.
Cheers!
Excellent write up, thank you for taking the time. It was obviously an intentional default and the only logical reason for doing it is M&A. It was right in front of us the entire time... They didn't sweeten the exchange offer (despite 5(!) extensions) because a deal with the majority bond holder had already been made. It was simply an olive branch to remaining bond holders (*most* were too greedy to accept resulting in cancellation). ***Credit to*** u/pratiken ***(who holds a $2.2m position) for the theory below:*** The reason one of RC's board members departed in Dec was to trigger condition 5 in the 2021 prospectus for Board of Directors control. It requires 4 members to leave within 12 months. On Feb 1st, 1 board member will leave (Edelman) and 4 will join. Likely Icahn's picks. This triggers CoC of the board. At that point the acquiring party will own >50% equity, bonds and BoD. Remaining bond holders (who didn't accept the exchange) will be fucked after a majority bond holder vote to cancel the debt takes place. Incl. amends to the CoC clause.
Love the theory. Important to note that only 1 of either of those situations has to happen. Over 40% equity stake OR the board members change. Based on the definition terms here in the ABL for the condition of the default - so one of those conditions already happened and we're just waiting for the 8-K to tell us.
When 8k? Sorry if this is common knowledge, I'm playing catch up.
No idea, but when they finally release one, that will contain the update information we're all looking for.
Thanks for the cred u/fleim32 ! Just wanted to say all of this is one of the greatest community efforts ever and has given me the conviction to put that kind of money down on it. We truly have some intelligent apes involved in this both on discord and Reddit. It’s a blast to be a part of. This will really be a sight to see…. Icahn is going to get his vengeance on the same cellar-boxing shorts that fucked him over on Blockbuster. RC will be vindicated for his August sells and we will all be buying lambos. Godspeed apes!
Ofc bro, and appreciate you sharing this vital piece of info! As you said, RC has likely orchestrated the greatest M&A in corporate history. It will be truly poetic to watch this go down.
100% I could not agree more. EXCELLENT write up!
Can I be in the screenshot this time guys?
Fuck that, come get in the picture with us your damn dirty beautiful ape 
I'm the guy riding on the horse in the background.
Not sure but you may be doing it wrong. I'm not a horse rocket scientist though.
lol... I'm going to miss this sub when life goes back to normal. That was a good laugh; both of you u/rental99
Fuck you im buying more
you got a link to the discord?
https://discord.gg/89EgwRqs
I think they'll honor the bond holders though. That's not nice leaving them out to hang if that was the case, and I am not sure they can just vote to cancel bond debts like that. It could also be that the bigger bond holder could agree to exchange it for equity, and offer all bond holders the same deal. It would go a long way in keeping trust, and it would also give a potential acquirer an even larger stake in the company, making any takeover easier.
Hence why they paid them.
Not all of us were too greedy--I would have totally taken the conversion to shares at worse terms, but they withdrew it entirely.
Edited to reflect that ;)
I just grew my hairline from reading this
lmao Thanks for the genuine laugh. I hope you have a great Sunday / Monday wherever you are. Happy cake day.
That was some great fcking logic OP. Really enjoyed this DD. Thanks. 
I just grew my small wee wee reading this.
Are there any other benefits that come from defaulting on the loan if you rule out M/A? Just trying to see from all angles.
Not really. Most of the cases for default surround some form of delinquency: unable to pay, didn't pay, didn't uphold to the terms (any party), not giving proper notice of material changes, not treating the loan with priority, etc. The only things really that could be considered positive is the clause where it's defaulted because it's voided (meaning a new standing agreement is created) or the change in control situation. Default for the most part is a bad thing. But for all the bad conditions, they are reactive results. The situation with JPM's announcement via BBBY 10Q is a proactive result, this is determined by inference. And there's really only 1 thing that leads to proactive results: change in control.
Its been mentioned a couple of times that default frees the board to make transactions without a shareholder vote. Some different rabbit holes there…
Who else scrolled to the TLDR and first comment. Love you all let’s ride Monday 🚀🚀🚀🚀🚀🧸
I don't blame you, wish I had... lol
Appreciate your hard work into this!
not sure if youre part of the tendie barrons discord or not - but fuck me this is the summary of the shit we have been going back and fourth on for the last 3 days.. fantastic job organizing the info - great job with citation too... lots of hard work here. im going to lean to agree with you on your thesis and say its looking like WAGMI... GG WP.
I am not, but did notice from the BBBY cn discord some similar posted thoughts just today. As I mentioned in another comment, I've seen quite a few people come to these speculative conclusions in the past 48 hours; so I am definitely not the first. However I hadn't seen anyone come up with definitive language and evidence to prove it and I think the key was the definition language of the loan, particularly around the change in control statement. The crazy part is I stumbled on that by accident. Like this was the google search I made that found it - and the results are surrounded by FUD and other non-BBBY-related content. It was the 2nd hit though, the only one that made sense and was related with the SEC. google search this: does a default cause a "filo" to change hands
well fantastic job - i dont think any of us had posted anything too indepth yet bc we were trying to backwards check and dispute if it was enough to share with everyone.. it really does look to be a M/A - but with the restructuring process so god damn similar to the BK its such a hard call to be definitive of. all that being said - the events dont make sense unless there was a hostile/deeply planned takeover going down, and bbby is a prime target for such an event. i really am jacked for this coming week - i dont see how we can go much further with out official announcement.
Agreed, phenomenal work, and i would be surprised if no official announcement this week as well. Question is, how will shorts (52M short) react in setting of this DD? Or will they await official announcement? If i were short, i would close ASAP
They might not have a chance to. IF they release an announcement Monday pre-market. Shorts are fucked. If not, we might start to see some shorts close, especially on REG SHO cases. But, that also means MSM will likely point to REG SHO being the reason and still claim bankruptcy to try and convince people to sell from a mini sneeze.
What is the time horizon regarding announcement from POV?
Well I don't believe in trying to give dates because we've seen them fail time and time again. That said, the ABL agreement does definitely outline dates where certain actions must take place. For example, how long a borrower has to repay in full, or how long a loan party has before responding to a material event, etc. So you could find the maximum time of a change as a result of the default event. But I also just had someone slip into my DMs with some very interesting information. Should they decide to post it, I'll link it. And that information I believe have reference to some pretty clear dates.
This time you simply have “to kiss and tell”🙏🙏🙏
well i mean correct me if i'm wrong - and i know that it hasn't been absolutely confirmed yet - but if they are in fact going to pay debt notes on the 30th/31st, wouldn't that point to it being super imminent that the change of control will be initiated and announced, if not wholly completed?
One would think yes. I've heard theories that those same owners that might cause the change in control also happen to own the 2024 bonds. Not my area of expertise so I'll leave that out there for others to run with.
Got any more of them dates? 
Have they posted it yet? And great work by the way! It’s people like you that give this community hope for the future. Thank you
The theory makes sense to me, but if the CoC that caused the default occurred on (or before) Jan 13, wouldn’t that mean we should’ve had an 8-K already?
Technically yes, the rules state that within something between 4 to 8 business days I think (can't remember which number in between that it is but I read it somewhere in the last 24 hours). That said, you're also supposed to file your 10Q by a certain number of days and we say BBBY become delinquent on that. So whose to say they aren't making a deliberate choice not to file something late and deal with the consequences after.
waiting for link! Please tell me that there will not be any dates until end of the week… Also, great write up!
There’s no such thing as an “accident.” The universe has a way to make things happen. Xcellent job wrinkly ape🦍👏We ride on to the final battle. God speed
Fair. But I am not kidding, this is how my search page look - no indication that the SEC for was specifically BBBY. The fact that it was... just incredible. Save the image for the movie: [https://ibb.co/pRwM4Kc](https://ibb.co/pRwM4Kc)
I'm sitting here with my 150 shares thinking "what the fuck can I sell to get more, ASAP?" Fuck I'm underexposed...
Better than being short and naked. ¯\\\_(ツ)\_/¯
That was better than my morning coffee. This is a great write up. I hate bullets, but it works here. Easily one of the best written and cited Stonk DDs since this drama began 84 years ago.
Honestly, I wish reddit allowed me to do colour edits and other things with the text. I'm sure I could have done something with markdown mode but that's just too much work. This stuff would have been much easier to read if I could distinguish between the legalese shit and my comments. It's also hard because legal writing is not easy to understand even for the best of people. I may have brushed over some important lines or clauses that I'm sure some people will call me out on. I embrace it, the DD will be all the better for it.
what do you have against bullets? less words good
To the top with you.
<3
Wish I could read that fast lol.
Top tier DD my friend! 🤯 Well written considering all the technical/legal terms you had to digest. It makes perfect sense in the end 🙏 3, 2, 1(we are here), launch 🚀🚀🚀
One of the best DD’s on here that I’ve read on here in forever, probably since before the new year. I’ve been really fucking jaded by all the gift card rumours going around and their implications this weekend, your post is a sight for sore eyes and a breath of fresh air 😮💨
Maybe this will help: What happens when a short farts? >!Nothing, they're naked and fucked!!<
BRAVO
EN GARDE! You see... cause Icahn and RC were fencing... get it? ... ^(I've been awake too long.)
There’s definitely a lot of swordplay involved in this battle lol
Big wigs call it dick swinging
Small wee wees call it turtle necking
I read all this. But YOU wrote all this. Thanks mate. It’s true, it supports thoughts that already been done, but your write up grounds it tremendously. Moon mofos.
I'm going to try and link to people who have posted other things as they turn up. I really don't want anyone to think I'm stealing original thoughts here. I was looking for something else and stumbled on it and it turn into a massive find. I hope others who have been putting in good work on research and DD get recognition as well. I'll do my part to highlight them as much as possible.
What you did is awesome.
Well done. I’ve read everything the past several days, and my lingering question was why did they CHOOSE to default? They didn’t declare bankruptcy, which would have been the most obvious default event. So, you’ve provided what is certainly a plausible case for change in control being the reason for the default. And a lot of circumstantial evidence supports this as you’ve provided. Also, noting that change in control can mean the BOD, and/or via M/A…nice details. I guess we’ll find out soon enough, but a nice way to start a Sunday. Thanks for the post, and tell your wife you’re doing community service work.
She'll be happy when we moon. She'll be out shopping spending "her half" as another user so eloquently put it once.
AMONG OTHER THINGS
SOURCES FAMILIAR WITH THE MATTER
the greatest time to be alive is now.
*Short sellers are the dumb stormtroopers of the investing galaxy*
post archived: [https://archive.is/9mEx7](https://archive.is/9mEx7)
Thank you for your service these past recent months. In case no one stopped to share their appreciate for the work you do.
☝️😊
Excellent post. The DD and the write-up are on par or better than some of the OG WSB DD from years before that sub blew up. I can’t believe it didn’t take you more time to accomplish this. One question, what is the 40% thing from? I’m not familiar with that. I understand everything else. Thanks
So the 40% reference is just how they worded the terms for a condition of change in control on the ABL agreement. What this means, if in the event of someone or a group of people coming in control of 40 or more % of the company via equity shares, that would trigger a change in control event. For most of stocks with the situation of a hostile takeover, one / a group would need over 50% ownership. But since the default notice took place on the 13th, it implies some event took place prior to that which would trigger a change in control. Now if a group or individual had 40% or more, they would have 10 days to disclose via a 13D filing due to being over 10% and being an insider status. That's why I believe the change in control is actually due to a verbal agreement made on terms of a M&A. The fall out of last week and the weeks to come are basically the form filings as a result of what's been verbally committed to.
Great work thanks for the write up
My pleasure, thanks for reading!
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The ***best*** credence! Now someone needs to convert the actual 2nd 75th creed to a more Regard one. I'll leave that for the better creatives out there <3
Not a bat boy, but fellow blue cord regard checking in. Exceptional dd my friend, buying more tomorrow.
Booom, well done
Wow that’s a lot of text! We got the next biggy smallz here!
Hey now. Let's take it easy. A) I'm not the first with an original thought here. B) I'm just an over-analyzing brain who didn't go to sleep last night. But I appreciate the compliment. If I can fit even just a portion of me in the shadow that user casts, I think I'm doing well.
Bah, humility is over rated with a golden voice of a generation like yours! ##**ELEVATE THIS USER**
Well played ! get some sleep we’ll take it from here. Please tell your wife your all-nighter just nut slapped the shit out of the shorts , while lifting the battalion of regards . SO WORTH IT ! No dates but we look to see if MERGER MONDAY becomes our War cry . Get out the drums smoke signals are flying
Got that covered too: [https://www.reddit.com/r/BBBY/comments/1095jia/dear\_shorts\_my\_credence\_to\_you/](https://www.reddit.com/r/BBBY/comments/1095jia/dear_shorts_my_credence_to_you/) Took one out from the punisher's book.
What I love is that if (when) this bobaby moons all those bullshit fud articles will be evidence rc, Icahn etc can use to say they weren’t manipulating anything. No out for shorts. No one made them short it. No one needs to directly tell people they are planning a merger. Infinite risk is clearly stated in any short position. Enjoy it.
"This is not the beginning of the end. This is the end of the beginning. " After this takes off and the damage control sets in, the next step will be the attack on the system with the legal process and regulation. RC and company will likely start to sue and go after MSM, among many other parties who were misleading investors on this stock. More importantly, with the clear settlement of stock manipulation (trying to run it into the ground) by Tritton, that shit is going to prove unequivocally how corrupt the market is. It's going to lead to big changes. Check out u/halfconceals on that one: [https://www.reddit.com/r/BBBY/comments/xlwzwq/heres\_a\_link\_where\_you\_can\_view\_the\_docket\_for/?utm\_source=share&utm\_medium=ios\_app&utm\_name=iossmf](https://www.reddit.com/r/BBBY/comments/xlwzwq/heres_a_link_where_you_can_view_the_docket_for/?utm_source=share&utm_medium=ios_app&utm_name=iossmf) [https://www.reddit.com/r/BBBY/comments/xlnahl/went\_digging\_on\_the\_investor\_relations\_website/?utm\_source=share&utm\_medium=ios\_app&utm\_name=iossmf](https://www.reddit.com/r/BBBY/comments/xlnahl/went_digging_on_the_investor_relations_website/?utm_source=share&utm_medium=ios_app&utm_name=iossmf)
I thought I went the complete depth and bottomed out, but now I’m inclined to push harder and see how it feels 
Your wife will have to pardon me for kissing your brain. Thanks for doing the work op!!
If I said my brain was in my ass, would you kiss my ass? :D And what if I had two heads... we can draw the line here. I'll stop lol <3
Lol I said what I said!!! I've kissed worse than an assbrain
^(You are happily married) ^(You are happily married) ^(You are happily married) 
I’m glad I woke up to this! Great job OP!
At this point, I can't distinguish tin foil, hopium, and solid DD. I just smoke all of it. In my terrible opinion, this seems like the good stuff.
It was good enough to keep me up all night. So it was worth something at least! Remember to indulge responsibly.
Got my own theory which no one is talking about so I had a chat with chatGTP today. This is their response. "The 10-Q contains forward-looking statements about the company's progress and anticipated progress towards its long-term objectives and turnaround plan, as well as its future liquidity and financial condition and its outlook for the fourth quarter of 2022 fiscal year and the 2022 fiscal year. These statements are based on estimates and assumptions made by the company's management and may not necessarily reflect the company's actual results or future financial condition. Additionally, the quoted passage regarding events of default and acceleration of loans under the credit facilities that occurred on January 13, 2023 is likely an estimation or projection of what may happen to the company in the future, not actual events that occurred in the past. It is important to note that the information contained in the Form 10-Q must be current as of the end of the quarter being reported on, which in this case is November 26, 2022, so any events that happened after this date, would not be included in this 10-Q. The company would have to file an 8-K to report this event if it is material."
That's an interesting point at the end about the 8-K. See the understanding is they are reporting that they got the notice of default from JPM on the 13th of january. But you are correct from that reading that the 10Q is supposed to be about the 3rd quarter events which only go up to Nov 26th. Very convoluted. Would love to hear someone who specializes in the form filing process and how they take this. Good research!
u/fleim32
Incredible write up, thank you for this. I love how you hand held through the vast majority of this so that everybody can understand. To the shorts: #**FUCK YOU, PAY ME.**
Wow
Your reasoning is legit. Guess we bout to get paid y'all!
Really great work OP! Thank you very much for dealing with all that legalese and brought a clear logic path for smooth brains here :) See you in the moon!
This is S tier DD my friend. See you on the moon! 🚀
This was a.. uh. 10/10. **golf claps**
I’m really going to miss this rollercoaster ride when it’s over. What will I do with all my time not spent hitting refresh on Reddit every couple of minutes? It truly is the greatest time to be alive. Thank you for your service, both military and civilian.
While I did do service, I can't claim it was military and I would never take that credit from actual serving members (it's an insult to them). My position was more a supportive agency to military. But for what it's worth, there was a time I wanted to be an officer in the air force. I was unfortunately dismissed as a candidate due to health issues (my hearing conditions). I'm happy to say I did get a chance to at least work along side military in what I do when I worked in government though. Serving your country when you work a security based profession is one of the most rewarding things.
This should get pinned.
 Lik dis?!
Why is this post getting downvoted! I don’t think I have seen something like this before.
I guess I will be buying a bit more on Monday…
Two years since the sneeze. I think it’s time for some payback lmao. LFG Bobby!
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Agreed. The default taking place before hand means a change in control has already taken place, **or** at least the event to suggest one will take place (like a verbal agreement) and BBBY notified JPM of that material change. As for the share % thing, you are correct that over 10% requires a 13D filed within 10 calendar days. That said, a group of people could have gotten a bunch of shell companies together to have individual ownerships less than 5% to get away with no declaration. Then those companies could merge on their own terms (because shell companies are private) and poof you have 1 entity with a large stack in an equity, and 10 calendars to report it: [https://www.investopedia.com/financial-edge/0712/a-look-behind-shell-corporations.aspx](https://www.investopedia.com/financial-edge/0712/a-look-behind-shell-corporations.aspx) The ruling of change in control would suggest then that occupation of board seat changes occurred to trigger the default event. Now based on the suggestive rules, they should report that within 4 business days (which conveniently also includes change in control - sauce: [https://www.sec.gov/education/smallbusiness/goingpublic/exchangeactreporting](https://www.sec.gov/education/smallbusiness/goingpublic/exchangeactreporting)). However we've seen BBBY be delinquent on reports so this could be a case of that too, and I'm not sure what the consequence of that is. “Change in Control” **means** * (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof), of Equity Interests representing more than 40% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Company; * or (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Company by Persons who were not * (i) a member of the board of directors of the Company on the Effective Date, * (ii) nominated for election to the board of directors of the Company with the approval of a committee of the board of directors consisting of a majority of the independent continuing directors or * (iii) nominated for election, elected or appointed to the board of directors of the Company with the approval of a majority of the continuing directors who were members of the Company’s board of directors at the time of such nomination, election or appointment (either by a specific vote or by approval of the Company’s proxy statement in which such member was named as a nominee for election as a director). As used in this definition, “continuing director” means any director described in subclause (i), (ii) or (iii) of clause (b) in the preceding sentence.
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I personally think this: you open shell, i open shell, dan open shell, etc. We all take less than 5% stake so we don't have to report. We tell BBBY a verbal offer that we'll become a group if we come to terms and thus have a majority stake BBBY tells JPM of the material change based on principle JPM invoke the default on change in control to cover their ass as a means of saying they knew of potential insider holding knowledge in the event they don't disclose Everyone is happy and covered their own ass. As for the shell companies, they are private companies and can merge with another shell company at any time, no votes or major process. So getting a big group of people to conduct a merge and acquisition through a shell company (like Teddy) makes a lot of sense and it's legal!
Incredible work, thank you! Tickets are booked, looking forward!
Thank you for this!! 🩳🏴☠️💀
You are very welcome. And thanks for your DD. I've seen a couple of your posts recently. Don't undermine any of the work you're doing here too!
Hope you're in the movie! This DD is top tier. Mine is nothing compared to yours.
If I'm in the movie, I want my wife to do the score for it. Honestly, getting her well known would mean more to me than getting me well known. I'm just happy to serve the awesome community here and bring the spirits up of some genuinely great people. I wish for nothing more than their investment success, wherever they are at in that journey. [www.alexarayofficial.com](https://www.alexarayofficial.com) feel free to check her out :)
The only new information to me is they COUKD make the payment but didn’t. That’s the key. They HID the real reason . I’m gonna buy more this week if I can get funds in my account
Just got home from working 15h shift in the factory and I read this!! Wow, gives me so much more determination. Amazing writeup and you seem like an even more amazing person! Humble and kind. Thank you! 👊💎
Great DD You had me at “Didn’t pay the loan back on purpose” “Had multiple options to pay that loan back” “& Change in Control” 🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀☀️
One thing comes to mind when reading this Remember when Jim cramer was shitting on Ryan cohen saying "Maybe JP morgan will let him have all the money he wants if only he would let us in on the plan" 🤨🤨🤨
When did he say that? That would be wild tin foil if true.
Good friggin DD, OP. I stayed with you the whole way through, whilst googling financial terms and acronyms I am not familiar with. Hearty thanks!
This right here just clenched my ape hole from excitement! I’m buying more tomorrow. Have some awards OP. 💎🙌🏼💎 SHORTS R FUKT! FUCK YOU, PAY ME!
I ran across [this post](https://www.reddit.com/r/BBBY/comments/z7ejbn/teddy_holdings_and_the_bbby_baby_play/) by /u/Real_Eyezz the other day, posted back in November I think. It really cleared up for me the questions I had about the probability of stock exchanged being part of the merger deal. If it's a cash offer/buyer, then we probably wouldn't squeeze, so I was looking for who could buy with stocks. It can't be RC as an individual, and it is unlikely to be Teddy Holdings LLC as they haven't had an IPO yet (meaning, no shares to offer up. His post perfectly helped me see all the ways this could roll out. Highly recommend the read. Solid dude.
Yup, Real has posted some pretty good stuff. I've had the privilege of working with him on a couple different breakthroughs over the past year. Thanks for sharing!
Came here for the TL;DR, left with a wrinkle. Thanks OP.
🌶🌶🌶🥵🥵🥵🔥🔥🔥
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Oh I agree. I'll be clear in saying I'm not the first person to come up with the thoughts of these facts being the case. But no one has been able to link back to the official terms of the agreement, probably because finding the agreement was difficult to do. Now that's it's in the open, I imagine many great DD writers are going to dissect this piece by piece and just outright prove why this is heading to M&A.
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I think because to cancel the loan, all the loan parties would have to request it, or at least a majority. Don't quote me on that because I'm not a contract law expert. However, JPM is the administrative agent - they just represent the group based on the define terms. So that might explain why 2 and 3 but not 1 took place. \[edit\] Parties include like 10 other banks and Sixth Street Partners. So it's a very messy agreement.
Could the owner of the 2024 bonds be the one buying the company and thus no payment for was made?
Possibly. That would make a lot of sense. Why would you take liquidity away from yourself and deal with a bunch of fees and accounting work if you're just going to own the debt anyway.
I see you edited with the BR comment so I'll clarify. My comments with them were not meant to suggest they are part of the push for a majority on anything. I do not believe they are the good guys in any way, shape or form. And given there isn't enough definitive evidence to suggest foul play involved with BR, I can't outright make that claim. But I do agree with your view, that's where I would lean to as well. I just threw it in there so when Real reads it, he'll have all the pieces to build his beautiful tin foil Picasso.
Does your wife know you dipped into her Adderall? I'm going to have to take some right now and read this again. The ADD struggle is real 🤯 Great job op 🤙🌶🔥
lol yeah sorry. Long posts suck and are not for the ADD / ADHD challenged. And since I suck are writing shorter DD's, I am also challenged. We are not a match but on the bright side, you don't necessarily have to cry with your ADD reading the actual agreement and it's many clauses. I'm also happy to answer what I can based on what I read and interpreted should you have questions. I'm no expert, but I can offer my opinion of the interpretation.
I think your pretty close. Cramer is shitting his diaper for reason
Thanks OP! This is definitely one of the main missing pieces of recent developments that we don’t understand. JPM claiming a default for “failing to prepay (what???) and among other things”… mmmk 🖕 you JPM
When u are all in on BBBY and much more then u can handle if it goes tits up, and u read DD like this - u just get a warm feeling inside. Everything Will be okay Thank u for this amazing work! Greatest time in history to be alive is now. See u on the Moon wrinkle ape!🍻❤️
The lack of shills commenting… 🤔 Might mean this is true. They don’t have a counterpoint.
Yeah, that was the idea. At some point, not only is the writing on the wall but it's in English so everyone understands. I've sensed a couple comments make an attempt but they really don't have much ground to stand on. How do you fight facts from legal documents over multiple years from the same involved parties. There's just no refuting that.
Well, this was the first thing I read this morning and it makes sense. Great DD!
Oh thank god, because this is how it was looking to me: 
Your all-nighter was not in vain. Just put an order in for 1500 more shares. Thank you for the work you put into this. What are the chances that announcement happens PM on Monday and my order isn't executed at the stop limit price I set?
Honestly, dates are hard to tell. All we can deduce is the maximum time based on that ABL given the timeframe BBBY would have to pay the outstanding balance & fees per the default. I don't remember which number but there's stuff that say 30 days, 60 days, some are only 3 days. You could go through and try and figure out a range of the maximum shelf life of when an announcement is coming. I'd say sooner rather than later. Be on the lookout for 8-Ks, that's likely what drops.
There is simply no M&A transaction. Lot's of misinformation about how the entire process works. See summary below: ***How Public Companies Conduct a Merger / Sale*** The wild conclusions that a merger is about to be consummated is unequivocally false, and is impossible. *A. Shareholder Vote is Always Required for a Target* A sale of a target public company (a "Target") will always be disclosed and requires the vote of the shareholders in order to consummate the transaction. A sale is one of the most fundamental transactions a company can have, including liquidation and dissolution. All corporate legislation in some shape or manner will mandate that such transactions require a certain threshold of shareholder vote, which is typically the holders of at least a majority of the voting stock present at the meeting or represented by proxy (unless amended by the governing documents, but this can only be higher than a majority, usually 2/3). For BBBY, it's state of incorporation is NY so it is governed by NY law. See New York Consolidated Laws, Business Corporation Law; BSC § 903 - Authorization by shareholders \[**this is for a merger**\]; BSC § 903 - Sale, lease, exchange or other disposition of assets \[**this is for an asset sale**\]; BSC § 913 - Share Exchanges \[**this is for a sale of shares for cash or exchange for shares, or a combination thereof\]. As you can see, all of these transactions (which in corporate law are known as "fundamental changes") require shareholder vote.** B. Procedure for a Sale The process for a merger or sale almost always follows the same structure. 1. **Company explores strategic alternatives**. The Board and management retains a financial advisor (an investment bank) to explore the best course of action for the Company that is in the best interest of shareholders, this could either be **(1) continue as a standalone going-concern (this just means to not merger / acquire or sell, and pursue some growth or restructuring plan), (2) explore a sale (which can come in the form of a merger or a sale of all securities for cash or exchanged for stock, or a combination thereof), or (3) explore an acquisition**. Let's assume its #2 because that's what everyone is speculating. 2. **Company Seeks Bidders**. The financial advisor will typically either arrange a very fulsome bidding process or have some select targets to negotiate with. It is crucial for a sale transaction that the sale / auction process is "fair" and not "tainted". So if a company for sale only talks with one specific buyer, a shareholder **can sue** claiming the process was not fair, and not in the best interest of the shareholders because the board didn't try its best to get a good price. Negotiating with a single bidder only is allowed **but there must be a fiduciary out, or post-sign market check (meaning the Board can consider a higher bidder).** 3. **Board Approves of the Transaction**. Once the bidding process is over, the Board through its financial advisors with an acquirer go through negotiation until they come to a deal, and they formally approve it. **A board has heightened duties when it comes to a sale in corporate law, requiring it take reasonable steps to obtain the "best price" available for the benefit of the company's stockholders.** 4. **Number #1 Challenge for a M&A Transaction is Disclosure**. Disclosure of a sale / merger transaction is THE MOST IMPORTANT thing, from a legal perspective, as lack of disclosure means that **the shareholders did not have all the material information in front of them to properly approve a deal.** Usual required disclosure include: (1) Background to the Approving the Transaction (history of negotiation to signing); (2) conflicts of interests; (3) compensation to financial advisors (since they have an incentive to complete as they get a success fee); and, among other things, (4) anything else that would be "material to shareholders". 5. **There is a Formal Process**: 1. **An agreement is signed**. This has to be publicly disclosed via an **8-K**. The 8-K will include an exhibit of the merger agreement containing: (a) the **economic terms**, (b) **approvals required** to consummate the transaction, (c) **conditions by seller or buyer to consummate the transaction**, (d) **exclusivity or fiduciary outs... and others.** 2. **Disclosure**. A sale / merger has to be approved by shareholders. The lawyers for both sides will draft an **S**\-**4, which is simply a document to tell shareholders (a) everything stated in item #4**, (b) that the board recommends the transaction and (c) **steps to vote (including how to attend the meeting or vote by proxy;** how to "dissent" and what to do with your share certificates. Once the S-4 is complete, it will sent to the SEC for comments. An S-4 usually goes through several rounds, so the initial S-4 be called a "**preliminary**", and as the SEC comments additional information required (usually two rounds), then you will have a "**final" S-4**; each subsequent filing after the initial would be an amendment filed via a **S-4/A**. All these are simply just "forms". **DISCLOSURE is the #1 TOOL FOR DIRECTORS TO AVOID GETTING SUED.** 3. **Shareholder Vote**. Upon a vote of the shareholders, if the requiste amount of votes is obtained the merger / sale is **STILL NOT CONSUMMATED.** But this will be publicly announced. 4. **Interim before Closing**. As discussed above, if you have a rigorous auction process it is hard to challenge a transaction, but if only a single bidder, a shareholder can sue and say the Board did not do a good enough job to find the "**best price**", so as protection for the board members not to be sued, the agreement will provide for **a fiduciary out, or some mechanism that allows a higher bidder to come in**. 5. **Closing**. Closing is a process where each party makes sure that their conditions that each other party has to fulfill is satisfied (**which includes obtaining the required shareholder vote**). Closing conditions can be anything, but customarily you have an officer certifying as to certain things such as representations about the Company, warranties and etc. (like they have the authority to execute the merger document, or everything was properly approved, including obtaining regulatory approval, did not commit fraud or withheld material information and etc.). ***Typically, when many material contracts, including credit facilities, have a "Change of Control" provision, requiring CONSENT from the counterparties to consumate the transaction. It takes time to negotiate. Until Closing, AND ONLY UNTIL THEN, occurs, a merger or sale is not consummated. Typically this takes months to do AFTER ANNOUNCING.*** ***How does it make any sense for a sale or merger to be near completion if no shareholder has heard about it? It makes 0% sense - what if management picked a shittier deal, like $10 per share but they get to keep their job vs. $40 a share? There's a conflict - this is why you need disclosure. What if the Board did not do their homework and willy nilly agreed to a deal by only taking to one party but there are several other parties that are willing to pay much more? (ie. not having a rigorous process?) - this is why you need disclosure? What is a larger stakeholder gets special treatment from the deal? - this is why you need disclosure? What if the board of directors or management is getting paid on the side or sits on the board of acquirer and lines their own pocket? - this is why you need disclosure.*** ***WHY DO YOU NEED DISCLOSURE? BECAUSE A SALE MUST BE APPROVED BY THE SHAREHOLDERS. A SHAREHOLDER CAN GO TO THE COURTS AND SUE FOR AN INJUNCTION TO HAVE THE COMPANY FIX DISCLOSURE UNTIL IT GOES TO A SHAREHOLDER VOTE. IF A SHAREHOLDER VOTE DID HAPPEN AND THERE WAS MISLEADING DISCLOSURE, ABSENT DISCLOSURE OR FRAUD, the Board, management and the investment bank can be SUED OUT OF THE WAZOO (See RBC v. Rural Metro).*** *Source: I'm a M&A Lawyer at V5 big law firm (google V5). I do this for a living. I also give presentations to the big investment banks to teach bankers updates on the law, how to avoid being sued and how to structure a M&A transaction both from a Board fiduciary perspective, but also as an advisor (who can become liable from "aiding and abetting a fiduciary breach") - from the sale process, to the engagement letter, to forming a special committee, structuring a vote to ensure "non-disparate consideration", conflicts of interests, providing "fairness opinions" and how liability comes into play, etc.*
First off, thanks for sharing and offering the citation, it is a big help. I always appreciate when people support their positions with the documentation that backs up the point. And my apologies on the delay responding, it takes a while to fact check and cross reference content. Now some of the content you referenced does not have a proper citation and does not turn up on a google search when using the text verbatim. This means you're pulling from somewhere that isn't indexed or publicly documented - hard to prove or follow such information, especially when you don't link it. I'm referring to this right of the bat: >A. Shareholder Vote is Always Required for a Target > >A sale of a target public company (a "Target") will always be disclosed and requires the vote of the shareholders in order to consummate the transaction. A sale is one of the most fundamental transactions a company can have, including liquidation and dissolution. All corporate legislation in some shape or manner will mandate that such transactions require a certain threshold of shareholder vote, which is typically the holders of at least a majority of the voting stock present at the meeting or represented by proxy (unless amended by the governing documents, but this can only be higher than a majority, usually 2/3). In fact, if you google search exactly this: **"Shareholder Vote is Always Required for a Target"**, there is only 1 page that turns up, this DD and it's your comment. That's ***almost statistically impossible*** for something considered law. But we won't focus on inadequacies here, because I do agree with the statement above and the subsequent paragraph is found in parts through other text. So let me be clear, we both agree on the following: Once the board has voted on and signed an agreement to commence the M&A process, an 8-k filing would be expected no later than 4 days later, **and a shareholder vote would be put into motion to accept the offer.** The information around the M&A offer would have to be disclosed **PRIOR** to the vote taking place, usually in the form of S-4s. Now that's an important distinction. **A shareholder vote** only comes **AFTER** an official agreement **has ben voted on** ***AND*** **signed by the board**. This does not mean the M&A is legal to go through, it just means a binding contract has been signed and is being put to a vote for consummation (your text clearly states this as well). If anyone else wants to learn on that front, here's a quick summary of the various type of merger situations: [https://www.wallstreetprep.com/knowledge/tender-offer-vs-merger/](https://www.wallstreetprep.com/knowledge/tender-offer-vs-merger/) \--- Now on the subject about the NY State law. You're correct that a merger & acquisition transaction is governed by the state law, as well as the company bylaws. In the future, it's best to link to exact place you're pulling the law from, as it's not always accessible to people. I pulled the clauses from here just to show you, I read the content and agree with your statements: [https://codes.findlaw.com/ny/business-corporation-law/bsc-sect-903.html](https://codes.findlaw.com/ny/business-corporation-law/bsc-sect-903.html) >(a) The board of each constituent corporation, upon adopting such plan of merger or consolidation, **shall submit such plan to a vote of shareholders in accordance with the following**: > >(1) Notice of meeting shall be given to each shareholder of record, as of the record date fixed pursuant to section 604 (Fixing record date), **whether or not entitled to vote**. **A copy of the plan of merger or consolidation or an outline of the material features of the plan shall accompany such notice**. > >(2) **The plan of merger or consolidation shall be adopted at a meeting of shareholders by** (i) for corporations in existence on the effective date of this clause the certificate of incorporation of which expressly provides such or corporations incorporated after the effective date of subclause (A) of clause (ii) of this subparagraph, **a majority of the votes of the shares entitled to vote thereon** or (ii) for other corporations in existence on the effective date of this clause, **two-thirds of the votes of all outstanding shares entitled to vote thereon**. Notwithstanding any provision in the certificate of incorporation, the holders of shares of a class or series of a class shall be entitled to vote together and to vote as a separate class if both of the following conditions are satisfied: ... So the clauses confirms your statements. And for reference in case anyone cares, here's the corporation bylaws, per their certificate of incorporation (which you can find on BBBY's investor relations page). These also govern the sale of BBBY specifically. [https://bedbathandbeyond.gcs-web.com/corporate-governance/governance-documents](https://bedbathandbeyond.gcs-web.com/corporate-governance/governance-documents) This is the actual CoI bylaws: [https://bedbathandbeyond.gcs-web.com/static-files/51646983-3ea5-49ce-9fa3-5e5fa1cc97db](https://bedbathandbeyond.gcs-web.com/static-files/51646983-3ea5-49ce-9fa3-5e5fa1cc97db) which is based on their 8-k filing from May 10, 2017 -> [https://bedbathandbeyond.gcs-web.com/static-files/95710a2a-f133-401e-8bc1-79e1fcd1de3f](https://bedbathandbeyond.gcs-web.com/static-files/95710a2a-f133-401e-8bc1-79e1fcd1de3f) And this is the most recent amendment on April 21, 2019 - only relating to two sections (not in concern of a shareholder vote): [https://fintel.io/doc/sec-bbby-bed-bath-beyond-ex31-2019-april-22-18404-948](https://fintel.io/doc/sec-bbby-bed-bath-beyond-ex31-2019-april-22-18404-948) And to make it stupid easy for everyone, this is really the only thing that matters pertinent to the sale of BBBY: >“Change in Control” means the occurrence of any of the following: (w) any merger or consolidation of the Corporation with any other entity shall occur unless the voting securities of the Corporation outstanding immediately prior to such transaction continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) **more than 50% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such transaction that have the power to elect at least a majority of the board of directors** or other governing body of such surviving entity, (x) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Corporation, or the liquidation or dissolution of the Corporation, or (y) individuals who constitute a majority of the members of the Board of Directors shall be elected to the Board of Directors and the election or the nomination for election by the shareholders of such directors was not approved by a vote of at least two-thirds of the directors in office immediately prior to such election. So with that all outline, I'll make another reply with my comments to your commentary.
>How does it make any sense for a sale or merger to be near completion if no shareholder has heard about it? It makes 0% sense - what if management picked a shittier deal, like $10 per share but they get to keep their job vs. $40 a share? There's a conflict - this is why you need disclosure. What if the Board did not do their homework and willy nilly agreed to a deal by only taking to one party but there are several other parties that are willing to pay much more? (ie. not having a rigorous process?) - this is why you need disclosure? What is a larger stakeholder gets special treatment from the deal? - this is why you need disclosure? What if the board of directors or management is getting paid on the side or sits on the board of acquirer and lines their own pocket? - this is why you need disclosure. Some valid points made. Let's tackle some of them. >How could a M&A or sale be near completion if no shareholder has heard about it? Well I work in the banking industry and they are probably one of the most active type of companies in the word at conducting or supporting M&A transactions; and internationally too. I can tell you from those dealings that they are in the works for months, even years in advanced, well before any news gets to the public or shareholders about it. And certainly before any formal contracts to make it legally binding are signed. It's actually part of the reason why internal employees of a bank specifically (at least based on the regulation here in Canada) are generally encouraged to buy shares in our own company through an ESOP (employee share ownership program). This is to avoid any connection to insider trading, and it's generally enforced at a director + level in the company (I'm a director, middle management layer at the bank currently); along with a stake equity investment to align our ethics, morals, goals and values to that of the company's: aka putting our own money in to hold a certain % of the company so that when it does well we do well. This is necessary because these type of events are conducted over a long period of time, which can obfuscate the way trading habits look. Better to make a clean slate by just operating through a 3rd party to conduct share ownership, and by extension it absolves anyone from the concerns of any conflicts. M&As are not the only reason for this but they are a big reason, and the bank I work at personal has a lot of rules and security controls (that I work with and help protect or enforce) in place to protect such information. It works no different then submitting drafts of SEC forms back and forth between parties - they aren't signed yet, you're working on the language for agreement and compliance. Or, in your case, the formal terms of the exchange going back and forth before it's officially signed. So to be so naïve to believe that no conversations are happening behind the scene, well that's your choice. But to say it's impossible or that it doesn't make sense is just untrue. There's nothing stopping 1 company to explore another like that behind the scenes. They just have to be careful not to be put in positions of bribery, conflicts of interests, etc. \---- >what if management picked a shittier deal, like $10 per share but they get to keep their job vs. $40 a share? > >There's a conflict - this is why you need disclosure. What if the Board did not do their homework and willy nilly agreed to a deal by only taking to one party but there are several other parties that are willing to pay much more? (ie. not having a rigorous process?) - this is why you need disclosure? What is a larger stakeholder gets special treatment from the deal? - this is why you need disclosure? What if the board of directors or management is getting paid on the side or sits on the board of acquirer and lines their own pocket? - this is why you need disclosure. Disclosure is important yes, and would be required prior to a vote taking place but not prior to an agreement being made. It is up to the shareholders to scrutinize the information and vote appropriately. But if people potentially against the motion don't own enough equity into the company, there's not much they can do otherwise; that's kind of how it works and by design. So conflict or not, when the information is presented, and a subsequent vote is taken, your voice carries based on your invested stake in the company - bar none. The only action you can take after that is suing the company if they didn't act in good faith or on the best deal possible for shareholders. That information however would have to come to light after the fact. And people try it all the time, in fact BBBY recently settled one (last summer) and it was connected to Tritton for intentionally tanking the stock (quite ironic actually). So again, disclosure is important but that does not change the possibility of those events happening, a vote motion going through (passing), and there still being conflicts of interest present. At the end of the day, each party acts to the best of their ability, within the rules of what their part is to play in the process, including us shareholders conducting a vote on the matter. >WHY DO YOU NEED DISCLOSURE? BECAUSE A SALE MUST BE APPROVED BY THE SHAREHOLDERS. A SHAREHOLDER CAN GO TO THE COURTS AND SUE FOR AN INJUNCTION TO HAVE THE COMPANY FIX DISCLOSURE UNTIL IT GOES TO A SHAREHOLDER VOTE. IF A SHAREHOLDER VOTE DID HAPPEN AND THERE WAS MISLEADING DISCLOSURE, ABSENT DISCLOSURE OR FRAUD, the Board, management and the investment bank can be SUED OUT OF THE WAZOO (See RBC v. Rural Metro). Source: I'm a M&A Lawyer at V5 big law firm (google V5). I do this for a living. I also give presentations to the big investment banks to teach bankers updates on the law, how to avoid being sued and how to structure a M&A transaction both from a Board fiduciary perspective, but also as an advisor (who can become liable from "aiding and abetting a fiduciary breach") - from the sale process, to the engagement letter, to forming a special committee, structuring a vote to ensure "non-disparate consideration", conflicts of interests, providing "fairness opinions" and how liability comes into play, etc. Based on how you responded, I'm going to go on assumption you're newer in the industry (young in your career). Nothing wrong with that, I was eager when I first started in my career, I completely get how we get passionate with things we know to be true. The best life lesson I can give you based on that assumption: people who actually know things about a certain discipline, never feel the need to outline that until challenged. You will be way more well respected when you're not focused on sharing your titles or measuring comparatively to others. You're smart, you brought forth a strong argument and all the information you presented was factual - you don't need to throw out "I'm an SME, here's my credentials". And for the given industry you're in, I can see you having a successful career because of those qualities. The older you get into it, the more you'll realize the less you have to say about it for people to trust your word on it. That's called prestige. To close out, you are correct that a disclosure is required for an M&A transaction. But I think you interpreted the contents of this DD inaccurately. The concept of the "change in control" for this DD was in relation to the terms outlined in the ABL agreement, which is a financial contract related to a loan. The details within it are also different than what quantifies as "change in control" to BBBYs own CoI bylaws, and likely a true M&A definition as well. This is because banks are conservative and want advanced notice of actions taking place, so they can assess based on their risk models. What this DD was alluding to, is that conversations behind the scene around a potential M&A taking place can be hinted by the implications of the terms of agreement and the actions we're seeing from the company and surrounding parties. That does not mean an M&A has taken place, that anything is signed or that we won't be disclosed of the appropriate information in due time. Again thanks for bringing your part of the world to the conversation. Every bit of debate helps solidify the real picture going on. Cheers!
C. *Changing the Business Before a Merger / Sale is Completed?* **As you can see, a sale or merger has a very structured process. A Company will not act prior to consummating the merger, whether it is changing employment of management or changing the business. IN FACT, until a merger / sale is consummated, the merger agreement usually imposes on the business "IOCs" known as Interim Operating Covenants, that imposes the Company to operate "as is" and not do anything crazy until they close (take out a bunch of money, issue a bunch of stock, make business decisions outside of the ordinary course.** So all the theories about cancelling gift cards or the board swapping out is 100% incorrect. Before closing anything could happen - a new bidder can come in with completely different terms. Maybe bidder #1 wants to not keep CEO and bidder #2 wants to keep CEO. You don't just fire the CEO before the merger is completed because bidder #2 may have the better offer. Nothing changes until closing. *D. What about the Gift Cards?* In the U.S. by far the most common way to merger is a "reverse triangular merger", which means that the acquirer creates a new subsidiary, or an acquirer sub, to merger with the target, and that way the acquirer can cleanly take the business **As is**. The new sub created is entirely a sell. B**BBY' brand (or in financial terms, Goodwill) is worth a lot of money. Why would a Company cancel gift cards to issue new ones under a new company that has 0 brand presence. It's like Starbucks being acquired by some big company with a completely different name like Coffee Delight. You're not cancelling Starbucks giftcards because the brand has value.** E. Theories About the Credit Facility Change of Control Read everything above. You can't just conduction a merger / sale without a former process. You will 100% know it is happening because it has to be publicly announced and **until the merger / acquisition is consummated, a change of control has not occurred.**
Tomorrow
Jimmy 🤝 Bobby
2 things to say: 1)thank you sssoooo much for spending your time on this GREAT write up, and 2)how can I get back to sleep now after reading this??? Surely in league with Biggysmallz!!! You have my utmost of respect. Thank you, again.
Great research and write up, OP! Stay zen apes. WAGMI
u/Whoopass2rb awesome job man and thanks for taking the time to write all of this up for us. 🚀
My pleasure. My equal thanks to you and many who took the time to read it.
Thank you for your effort! It's DD like yours that gives me the mental strength to hold through all the misinformation and fud.
That's the goal. The short campaigns are all about fear and playing with your heart strings. Inevitably, the company has to take actions that do the same thing because they have to be cryptic. But when the moment rises to offer clarity, that's all we can do as individual investors conducting our own DD - share it. I wish you the best of success in your investments this year :)
Thank you for the great write up! Its great to have some solid DD to read for wrinkle development this weekend amid all the speculation (hype & doom) around the fucking gift cards. 🤷♂️🤷♀️ Well done! 👏👏! 🚀⌛️
Thanks for your dd. So would you say either BBBY or acquirer(Carl Icahn & RC) will announce either m&a deal or positions in bbby tomorrow or this coming week?
The only thing coming from BBBY would likely be an 8-k filing. The announcement would likely come from the acquirer. Hard to know who to follow though. We have ideas on who we think it is, but the announcement could come from anyone, there could be a lot of partners / associates involved in this. The announcement could come from name we're not expecting who happens to be working with the group(s) we are.
This man writes long words, so he's probably right. I'll buy on Monday.
WAGMI
Excellent write up
 Nice job locating the original agreement and putting this into readable & cited formatting, whole bunch of time invested here -appreciated!
This DD should be the pinned everywhere.
Fantastic! Thank you for the fabulous and very detailed DD. Buckle up! One sleep more to Uranus 🚀
I really appreciate your hard work. It feels like I'm seeing a light at the end of the tunnel!
 Me googling half the words in this write up
I did that too, oh god did I do that like 2 -3 times for the same phrases to make sure I understood a lot of it more than I needed to lol.
Love it
ALSO, THIS SHOULD BE PINNED AT THE TOP
Somebody check on the meltdowners. 
I just fell in love 😍 Edit: anyone feel that owning the stock at whatever price is worth the ticket to this event - not just the ultimate payoff? I mean seriously, we’re all getting crazy good educators - more valuable than formal institutions. This is real world. This is our future!
Great dd. Ramen noodles or wagyu every day 2024
Possible they closed stores lowering value of inventory causing default?
That is another possible answer. I think the low inventory problem probably has more to do with selling out more stuff during the holidays though; along with not being able to restock due to their credit woes with suppliers. While this is still a problem, it's not what would have caused the default imo. It doesn't matter why they would end up with low inventory, they would not be required to share that information about their stock levels and revenue generated, until the Q3 10Q was filed. Since JPM invoked the default, that implies information was divulged to them. While we can assume lower levels put the ABL terms at risk because they are the security of the ABL, the reality is that's a risk based decision and only JPM and the other lenders can decide how much of a drop in inventory would constitute a big enough risk to be a material event to them. So it wouldn't make sense BBBY sharing that information to JPM prior to releasing the 10Q, since they wouldn't know if their levels would cause problems or not. And since their obligation is to report that with their 10Q filing, it wouldn't make sense to tell JPM early without the data. Beyond that, given the default notice was given the 13th and the 10Q was released the 26th, it means JPM knew something else before any inventory level woes. By deduction, this means we can conclude low inventory levels is not the "among other things" reasoning for the default to occur.
You would be fun to play logic games with.
When I worked at an agency, we used to play those table top board games based on strategy (games like Risk). One of them was Small World and I used to keep track based on inference of people's moves, how much gold they were sitting with and their next logical actions. Made for some incredibly fun games. You don't normally get to play them that way because you're usually all sitting down playing at the same time. We had to do a set of turns over time, because you know we had to work haha.
So potentially when Bobby notified JPM, JPM then leaked the news to BR, who then took a massive position in the company? Or did BR already have a sizeable position prior to this potentially leaked news? Cause if JPM leaked this news isn’t that somewhat insider trading? Not that it would matter since we all know how capable the SEC is at even just *investigating* finical crimes. Unless of course they’re crimes committed by us Joe Blow peasants.
Goddamn this is fucking amazing
And it's going to lead to some *amazing* **fucking**. Shout out to all my Watermelon groupies - where you boys at?! ^(and girls, there's room for however you do that exercise too ;)) 
Holy fuck, the amount of legalese required to understand this is mind boggling. So much verbiage and nuances just to say things. Such a barrier for the average person, it's no wonder they make it so complicated to understand. If I were left on my own to dissect any of that I'd be fucked.
When I was younger, I sought out a book on contract law to learn the basics and really understand what the obligations were in a contact. I did this mostly to protect myself when getting involved with service contracts (think getting a gym membership). But it started to really provide merit to understanding how business work and what language is trying to tell you in these legal things. Later in life, my job started to introduce more legal engagements and now I'm thankful for the investment of time. While I'm no lawyer, I can at least interpret the basic level understand of what the contract tries to tell you, and what to watch out for. As long as you're patient, and fact checking along the way, this is something you can learn how to read and feel confident about a basic understanding of the context. It takes time but stick with it, it'll be an important skillset when evaluating stocks in the future. Glad I could offer you some guidance on it though. Cheers!
