If GameStop was the favorite stock of 2021 among individual investors, Bed Bath & Beyond is quickly lining up for this year’s crown among meme stock investors. But the home goods store appears to be packing all the volatility from the r/WallStreetBets favorite into a matter of days.
In the last month, shares of Bed Bath & Beyond have soared 365%. But on Thursday, they tanked, losing nearly 30% of their value at one point and ending the day down around 20%, before quickly falling another 30% in after-hours trading. What’s going on? It’s a perfect storm of household names, speculative investments, and, naturally, Reddit. Here’s a crash course in recovery if you’re trying to get up to speed.
What caused the rise in Bed Bath & Beyond’s shares?
As the rise at GameStop and AMC, Bed Bath & Beyond’s rally was largely driven by individual investors (also called retail investors), many of whom flock to Reddit’s r/wallstreetbets subreddit. On Friday, August 12, the stock was trading around $11 per share, when prices started to rise. By Monday, August 15, it was over $16. And it has gone up to $23.
The buying spree comes seven weeks after CEO Mark Tritton was displaced, and the company reported disappointing earnings for its fiscal first quarter.
Who is Ryan Cohen and how did he drive the rally?
Ryan Cohen, the co-founder of Chewy and the current president of GameStopannounced on March 6 that he had bought a large stake in Bed Bath & Beyond through his venture company RC Ventures. At the time, he bought a 9.8% stake in the company, but increased his holdings over time to own 11.8%, making him the largest non-institutional shareholder.
Cohen is seen by the r/WallStreetBets crowd as GameStop’s savior and the company’s best bet for a lucrative future, so his continued interest in Bed Bath & Beyond eventually drove retail investor interest into a frenzy. feeding.
How big were the gains at the peak?
They were quite massive. Bed Bath & Beyond shares traded in the $4-$6 range for most of last month. But from August 4 to 13, they increased to more than $23. Even with Thursday’s spiral, the stock is still up nearly 275% over the last 30 days.
However, longer-term investors are not celebrating as well. So far this year, the company is up just 22% as the stock saw a big surge in April, but has been falling ever since.
What led to Thursday’s sell-off?
Ryan Cohen gives and Ryan Cohen takes away. After the market close on Wednesday, RC Ventures announced through a regulatory filing that it planned to sell its entire 11.8% stake in the company within the next 90 days. That spooked investors, especially some on Reddit, and the sell-off began almost immediately.
Why are stocks falling further after trading hours on Thursday?
After the market closed on Thursday, Cohen announced through another regulatory filing that he had, in fact, finalized the sale of all of his Bed Bath & Beyond holdings. It’s unclear when this happened, but he definitely walked away from the company, just days after regulatory filings raised investor hopes that he would stay.
On Monday, Bed Bath & Beyond, through a regulatory filing, said Cohen had purchased more than 9.4 million shares of the company through RC Ventures, including more than 1.6 million in out-of-the-box call options. of the money with strike prices between $60 and $80 That indicated he was in it for the long haul. Three days later, he’s out completely.
After closing down 20% on Thursday at $18.55, the stock quickly fell another 30% in after-market trading on the news to $13.46 per share.
Who is Jake Freeman and how does he factor into this?
The other party to this one-two punch is a 20-year-old college student named Jake Freeman, who also sold his shares of the company on Wednesday, all for $5 million.
Freeman, an applied mathematics and economics student at the University of Southern California, was the company’s second-largest individual investor. He bought those shares in July for less than $5.50 each, bringing his profit to more than $100 million.
“I certainly didn’t expect such a vicious rally to the upside,” Freeman saying financial time. “I thought this was going to be a work of more than six months. . . . I was very surprised that it went up so fast.”
After selling the shares, he went out to dinner with his family and then flew back to school in Los Angeles.
Expect . . . How could a college student buy so many shares?
Freeman was able to raise $25 million, mostly from friends and family. (He interned at a New Jersey hedge fund and has invested for years with his uncle, so he had a track record.) He invested everything in Bed Bath & Beyond and immediately sent a critical note to the board, noting that the company was “he faces an existential crisis for his survival.“
Is Bed Bath & Beyond worth the high prices at which it was listed?
In the end, the value of a company is determined by its shareholders. Many would argue that GameStop isn’t worth anywhere near its $37 retail price (much less the $81 it fetched last year), but if you want to be a stockholder, that’s the price of admission.
Professional investors, however, say the momentum in Bed Bath & Beyond shares borders on the ridiculous.
“This is a company that had already been considering buying its coffin not too long ago and has pretty anemic year-over-year growth projections in the short term,” said Eric Schiffer, CEO and president of private equity firm Patriarch Organization. . saying market clock. “East [rally] it has less to do with logic and rationality and more to do with the tribe [of meme stock investors]it is a call to arms.”
This article has been updated with information about the BBBY secondary market.