(Bloomberg) -- It has all the makings of Wall Street’s last big score from the meme-stock frenzy. 

Take one of the financially collapsing companies loved by the army of day traders who once pushed its share price through the roof. Extend it a lifeline in return for a chunk of stock. Then get ready to sell for a large profit.

That was what Mudrick Capital did for the movie-theater chain AMC Entertainment Holdings in mid-2021, when its stock price was surging as excitement for the debt-ridden company reached its peak.

And that’s what a group led by hedge fund Hudson Bay Capital Management is doing now for retailer Bed Bath & Beyond Inc. — with a twist for the new market reality.

Instead of selling into a fierce rally, the $225 million stock-and-warrant deal with Bed Bath & Beyond was structured to allow the investors to lock in a quick profit even if the company’s share price falls. It’s as if they knew that rather than stoking further gains, the deal would turn off many in the now-skeptical meme-stock crowd. 

The stock has tumbled, losing more than 50% over the past three days on concern the deal will flood the market with new shares and do little to alter the company’s long-term fate.

“They’re not doing it because they’re altruistic and they want to save an old brand,” Morningstar analyst Jaime Katz said. “They have structured the deal such that the return that they are able to achieve accounts for the increased risk that they are facing.”

The reaction to the Bed Bath & Beyond deal is another sign of how much the speculative excesses of the post-pandemic era have disappeared since the Federal Reserve pulled the plug on its near zero interest rates. Ever since, virtually no corner of the markets has been spared, vastly thinning the ranks of meme-stock traders happy to gamble when prices only went up.

The deal, at one level, reflects that shift. According to a securities filing, they received the right to immediately convert their investment into common stock at rate of $2.37 a share, below even the $2.61 closing price on Wednesday. Moreover, that rate will be adjusted based on the market price, allowing the group to profit even if the price continues to fall, with the floor dropping to as low as 71.6 cents. 

The group also agreed to potentially buy another $800 million in convertible preferred shares if certain conditions are met.

After the deal was announced, the arrangement drew contempt on the Reddit chat board where meme traders congregate. “Imagine buying shares of a dying company,” one wrote. “People deserve to lose their money.”

While the shares were little changed Thursday, short sellers have piled on bearish bets. A handful of hedge funds stepped up wagers that the company will fail, adding to selling pressure and setting them up for a lucrative return if the retailer goes bust, according to one money manager deploying the strategy.

That’s promising to put further downward pressure on the shares. Meanwhile, there’s few indication that small-time investors are willing to bet strongly on the company’s comeback.

Such investors have largely shifted their attention to large tech stocks like Tesla Inc., which have rallied this year on speculation that the Fed’s interest-rate cycle is near its peak. Even among the remaining meme-stock traders, enthusiasm for Bed Bath & Beyond has waned since activist investor Ryan Cohen sold his stake in August. 

Since the start of the year, individuals have bought just $98 million of Bed Bath & Beyond shares, less than the $205 million they snapped up in a single August week, data compiled by Vanda Securities show. While Fidelity customers bought the dip on Wednesday, making it one of the platform’s most bought stocks, sell orders have mostly outpaced those to buy in recent sessions.

The magnitude of retail buying through stock and options has been “relatively small compared to last year – not enough to offset the large selling from the institutional community,” says Giacomo Pierantoni, a data analyst with Vanda who tracks retail trading trends. 

Wall Street’s securities analysts are equally dubious about Bed Bath & Beyond’s prospects. All but two of the 13 analysts who follow the company are advising that clients sell the stock. The average 12-month price target is just $1.16, implying it will fall by more than half. One has a target of just $0.10. 

Odeon Capital’s Alex Arnold had succinct advice for anyone who owns it: “Take the money and run.”

--With assistance from Katrina Lewis and Reshmi Basu.

(Updates with Thursday trading in 12th paragraph.)

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