Billionaire investor Ryan Cohen cashed out his entire position in Bed Bath & Beyond Inc. BBBY -19.63% this week, ending a wild trade in the stock and the latest sign that meme stock mania is still alive is.
Mr. Cohen, the co-founder of pet supply retailer Chewy Inc., developed a deep fan base of individual investors over the past year after becoming chairman of GameStop Corp., the original meme stock. In March, he unveiled an activist position at Bed Bath & Beyond, sparking a stock price rally.
Many individual investors followed Mr. Cohen to Bed Bath & Beyond to support his quest to push for changes to transform the company. They hailed his agreement to add three new directors to the board. Then this week, they watched as he dumped his stocks, some with dismay.
Just a few days ago, the stock’s trajectory appeared to be different. Many individual investors began flocking to the stocks in August, and the social media chatter heated up again. Trading activity has been haywire at times, marked by halts in trading and frantic activity on the company’s option bets, with many positioning for an even bigger swing in the shares.
“‘Someone bought it for $30 and someone lost $12 a share to enrich Ryan Cohen.'”
— Michael Pachter of Wedbush Securities
At its peak in August, shares of Bed Bath & Beyond climbed to $30 on the day, up nearly 500% for the month. They closed at $18.55 on Thursday, down 20% – after Mr. Cohen’s proposal to sell his shares was revealed – before falling another 35% in after-hours trading after securities documents showed he had sold all his shares had sold.
“Someone bought it for $30 and someone lost $12 a share to enrich Ryan Cohen,” said Michael Pachter, an equities analyst covering GameStop for Wedbush Securities. “This is a retail investor who bought the stock.”
Mr. Cohen realized a net gain of approximately $60 million on his sale of the shares based on an analysis of regulatory filings. He declined to comment.
Its massive gains suggest that the meme stock mania that grew from the depths of the Covid-19 pandemic is still ongoing 18 months after it started. And this time, novice investors playing with small amounts of money aren’t the only ones trading troubled companies. Mr. Cohen’s gains illustrate the ability of larger investors to capitalize on individual investors’ voracious appetites for momentum trading — and lock in big profits in the process.
Mr. Cohen’s sale adds uncertainty to an already financially troubled company. Bed Bath & Beyond is losing customers, has little money and operates without a permanent manager.
Bed Bath & Beyond has lost customers and is running out of money.
Photo: Michael M. Santiago/Getty Images
However, the retailer’s financial woes didn’t seem to worry individual investors, many of whom jumped in just before the stock plummeted. Her purchases of Bed Bath & Beyond hit the highest amount on Tuesday, just two days before the stock began falling, according to Vanda Research data as of 2014. On Thursday, shares of Bed Bath & Beyond were the most popular buy for retail investors on brokerage platform Fidelity.
And for a moment, it seemed like Bed Bath & Beyond might be headed for a massive short squeeze, a phenomenon that occurs when a stock rises so much that investors betting against it are forced to buy back shares, which the stock has yet to do drives further upwards .
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According to Ihor Dusanivsky, head of predictive analytics at S3 Partners, short sellers or investors who have been betting against the stock had already started dumping their bearish bets as early as last week when the stock was above $10 a share and beyond shot, said Ihor Dusaniwsky, head of predictive analytics at S3 Partners, a technology and data analytics company. Meanwhile, new investors were still pushing for bearish bets as the stock continued to climb.
Short interest in Bed Bath & Beyond rose to as much as 55% of the stock’s free float on Tuesday, according to S3 Partners. Meanwhile, the average cost of shorting Bed Bath & Beyond stock, known as the borrowing fee, rose to 80%, a 2022 high.
On Thursday, any possibility of a short squeeze seemed to dissipate as the stock fell, prompting some individual investors to dump their own shares. In online retail communities, some retailers have reacted with anger.
“The casino is over,” said 34-year-old individual investor Richard Hoefer, who sold his stake in Bed Bath & Beyond after hearing the news that Mr. Cohen had divested his stake.
In early August, Mr. Hoefer, a Louisiana engineer, invested more than $13,000 in Bed Bath & Beyond stock and used the money from a fund for his wedding the following year. He began buying after seeing chatter explode on Reddit’s WallStreetBets and was encouraged by Mr. Cohen’s large involvement in Bed Bath & Beyond.
Mr. Hoefer walked away with a profit of around $3,000. “I’m fine with him selling,” he said, “but I was expecting a longer drive.”
After years of declining sales, Bed Bath & Beyond is facing an existential crisis. WSJ’s Suzanne Kapner explains why the company has fallen on hard times and looks forward to what’s next for the veteran retailer. Photo illustration: Laura Kammermann/WSJ
write to Caitlin McCabe at [email protected] and Gunjan Banerji at [email protected]
Corrections & Enhancements
Ryan Cohen’s move comes about five months after he took a major stake in the company. A previous version of this article incorrectly said in the headline that it was about a month after that. (Corrected on August 18)
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