Investor JAT Capital Unleashes Critique in Letter to Bed Bath & Beyond Board Over CEO Ouster and Leadership Vacancy

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Business / Wednesday, 22 November 2023 00:50

Investment firm JAT Capital has unleashed a scathing letter to the board of the newly rebranded Bed Bath & Beyond, accusing them of evading shareholder inquiries and engaging in unprecedented "poor behavior." With a substantial 9.6% stake in the company, JAT Capital, while claiming not to be an activist fund, voiced severe criticism against the board for a series of actions, including the cancellation of planned investor conferences and what it deems as a distortion of facts surrounding the ouster of former CEO Jonathan Johnson.

In the letter, penned by JAT's founder John Thaler, the firm expressed frustration at the board's refusal to engage constructively and highlighted its attempts to suggest best practices for preserving and enhancing shareholder value. Thaler emphasized a shift to a more active posture, driven by what he perceives as an unprecedented level of poor behavior by the board, stating, "The things that I have heard, the things that have been spoken directly to me, and the actions I have witnessed are in a category that I have never seen."

Bed Bath & Beyond, formerly known as Overstock.com, underwent rebranding after acquiring Bed Bath out of bankruptcy. Despite this strategic move, the company faced challenges, including sluggish sales and a dwindling market cap. JAT's scathing critique comes in the wake of mixed results for the company's first quarter as the new Bed Bath & Beyond, marked by steep declines in sales and profits.

Earlier this month, JAT Capital called for the ousting of CEO Jonathan Johnson, a move that was swiftly followed by the announcement of his departure by the company. In the recent letter, JAT questions the removal of Johnson's board seat post-ouster, characterizing it as an attempt to diminish shareholders' ability to influence decisions. Moreover, the firm accuses the board of disingenuously framing Johnson's departure as a voluntary step down rather than an outright termination.

The missive challenges the board's narrative, asserting that rather than being forthright about Johnson's firing, the board opted for a crafted press release suggesting a joint decision for leadership transition—an assertion labeled as ludicrous by JAT Capital. As tensions escalate between the investment firm and Bed Bath & Beyond, the unfolding dispute raises questions about transparency, governance, and the company's strategic direction.

In a scathing letter to Bed Bath & Beyond's board, investment firm JAT Capital has criticized the board's handling of CEO Jonathan Johnson's departure, labeling the timing and framing of his exit as disingenuous. The letter questions the board's decision to release a press release during a crucial rebranding phase and a $150 million marketing campaign, suggesting that the narrative presented serves the board's self-preservation interests.

JAT Capital has been vocal in its call for Marcus Lemonis, the CEO of Camping World and renowned TV personality from CNBC's "The Profit," to take over the management of the company. The investment firm alleges that the board is suspicious of Lemonis, accusing him of harboring a "secret nefarious plot." According to the letter, Allison Abraham, chair of the board, has expressed concerns about Lemonis, claiming that he might have a hidden agenda. Lemonis, who joined the Overstock board last month and supported its transition to Beyond Inc., has expressed disappointment at the strained relations between the board and investors. He denies any interest in becoming Bed Bath & Beyond's CEO but expected to be appointed executive chairman, a move yet to materialize more than a month into his tenure.

The letter from JAT Capital emphasizes the need for transparency, calling on the board to address questions surrounding Johnson's departure and Lemonis's role definitively. The investment firm urges stakeholders, from vendors to sell-side analysts, to demand greater transparency from Bed Bath & Beyond's board. As tensions escalate and the spotlight intensifies on the company's leadership, the call for clarity and accountability underscores the challenging dynamics at play within Bed Bath & Beyond.

"In the pursuit of transparency and accountability, I am fervently urging the Board to provide a comprehensive explanation for its recent decisions, which, as outlined in the last 60 days, seem to be contrary to the best interests of the company and its shareholders," the letter asserts. "This request is not unwarranted, and it is imperative that the Board clarifies the motivations behind these actions. Regrettably, the Board has thus far avoided offering any elucidation on the rationale behind their decisions."

"In the pursuit of transparency and accountability, I am fervently urging the Board to provide a comprehensive explanation for its recent decisions, which, as outlined in the last 60 days, seem to be contrary to the best interests of the company and its shareholders," the letter asserts. "This request is not unwarranted, and it is imperative that the Board clarifies the motivations behind these actions. Regrettably, the Board has thus far avoided offering any elucidation on the rationale behind their decisions."