Comment on this story
comment
A 20-year-old college student made a timely move at Bed Bath & Beyond, making nearly $110 million on the meme-stock favorite after its stock price quadrupled and before its most buoyant shareholder signaled plans to sell it all .
Jake Freeman, a math student, acquired a 6.2 percent stake in the ailing home goods chain in July. Through a Wyoming-based holding company he founded, he bought 4.96 million shares at $5.50 each. On Tuesday — a day that saw the stock surge above $27 a share before closing at $20.65, up 31 percent — he sold it all.
The Financial Times reported that his holdings were worth more than $130 million at the time, earning him about $110 million.
His timing was impeccable: activist investor within 24 hours Ryan Cohen signaled that he intends to sell the 9.8 percent stake acquired through his venture capital firm RC Ventures. It was Cohen’s interest in Bed Bath & Beyond that lit up online forums like Reddit’s r/WallStreetBets and sent the stock price skyrocketing. As reports surfaced Wednesday afternoon that Cohen had filed a Form 144 with the Securities and Exchange Commission — a notice of intent to sell shares — the stock slipped in after-hours trading. It closed at $18.55 on Thursday, down 19.6 percent, and plunged another 35 percent after the close.
Why Bed Bath & Beyond Stock Is Up More Than 350 Percent This Month
Cohen has a loyal following among small retail investors due to his key role in the GameStop frenzy. In late 2020 and early 2021, traders on Reddit and other online communities bought the video game retailer’s stock to cash in on a company that many institutional investors had written off. The stock soared from nearly $5 to over $480 — a stunning rise for a brick-and-mortar store in decline. The run-up created foam and volatility, and the meme stock was born.
Small investors banded together and looked for other companies that Wall Street was shorting or betting against. The strategy, outlined on Reddit, used what is known as a short squeeze, in which those who are betting against a stock — typically hedge funds — are forced to buy shares to close their position.
Cohen founded the online pet food company Chewy and later became the CEO of GameStop. His plan to revitalize the video game retailer was spurred by an unexpected explosion of online enthusiasm for the company over the past year, sending its share price skyrocketing and making it the first of many meme stocks. Others included cinema chain AMC, smartphone maker BlackBerry and telecommunications company Nokia.
Freeman attends the University of Southern California, where he majors in applied mathematics and economics. according to the Financial Times. The report said he raised funds for Freeman Capital’s initial investment from friends and family. His LinkedIn profile indicates that he was an intern at New Jersey-based hedge fund Volaris Capital.
In a July 21 letter to the company’s board of directors, he said Bed Bath & Beyond “is facing an existential crisis for its survival.” He encouraged them to slow down, restructure their capital and raise more funds.
“Freeman Capital’s plan to realign [Bed Bath & Beyond] consists of two critical pillars: deleveraging and raising capital,” he wrote.
The stock market is in bear territory. What does that mean?
Bed Bath & Beyond has been struggling for years. First-quarter sales were 25 percent lower than a year earlier as the retailer posted a net loss of $358 million. It also has $1.37 billion in debt.
As the stock surged more than 300 percent as it drew attention online, Freeman took the opportunity to liquidate his holdings, SEC filings show, selling $130 million worth of shares on Tuesday.
Freeman told financial news site MarketWatch that he “didn’t expect the stock to go up that much,” adding that he now thinks the downside risk is too great.
“I expected that [Bed Bath & Beyond] better structure its balance sheet to unlock value. I felt on these elevated levels [the stock] was not worth it from a risk-return perspective.”
According to the Financial Times, Freeman and his uncle Scott Freeman, a former pharmaceutical executive, have separately taken an activist stake in pharmaceutical company Mind Medicine, a New York-based company focused on psychedelic-inspired drugs.