The move comes just weeks after the retailer said it had defaulted on a loan, raising concerns about its future.
Shares of the retailer, which closed up 92.1% at $5.86 in wild trading session, were down as much as 25% in extended trading.
Bed Bath said it was planning to raise about $225 million through an offering of Series A convertible preferred stock. An additional $800 million could be raised through people exercising warrants to buy common stock.
The embattled retailer said it would use the proceeds of the offering to repay outstanding revolving loans under its asset-based lending (ABL) facility.
In January, the company raised doubts about its ability to continue as a going concern just months after it announced more than $500 million in new financing, as well as job cuts and 150 store closures.
Retailers in distress often look to bankruptcy protection after the holiday season to take advantage of the cash cushion provided by recent sales.
Bed Bath & Beyond said in January it had defaulted on a loan from JPMorgan Chase Bank N.A. Bloomberg News reported that the company's efforts to find a buyer had also stalled.
Prospective buyers sometimes wait until a company files for bankruptcy before agreeing to purchase assets, hoping to negotiate more favorable terms.
Sources have told Reuters that Bed Bath & Beyond has lined up liquidators to close additional stores unless a last-minute buyer emerges.
(Reporting by Granth Vanaik; Editing by Anil D'Silva)