A 20-year-old US university student has made a profit of $110 million (£91 million) on a month-long bet on the Bed Bath & Beyond meme stock.
Jake Freeman and his family bought nearly 5 million shares of the ailing US home goods retailer in July for less than $5.50 a share for a total issue of about $25 million.
After shares surged nearly 500%, prompted by intense chatter about the stock on Reddit message boards, including multiple posts from Freeman, he sold it for more than $130 million — crystallizing the huge profit.
They rose as high as $28 on Tuesday, when Freeman reportedly sold most of his stake. Shares of Bed Bath & Beyond, traded on ticker BBBY, fell to $23 on Wednesday and fell another 14% to $19.70 in premarket trading on Thursday.
Meme stocks are stocks that skyrocket thanks to hype on message boards and social media regardless of a company’s success. They gained prominence early last year when shares of struggling companies like US retailer GameStop soared, in part due to a campaign to punish hedge funds that bet their value would fall.
Although these stocks eventually slid back down, the meme stock trend enjoyed a resurgence this summer, with BBBY stocks taking the lead.
Freeman, an applied mathematics and economics student at the University of Southern California, said he was “shocked” by the speed of the stock’s rise.
“I certainly wasn’t expecting such a vicious rally to the upside,” Freeman told the Financial Times in an interview. “I thought this was going to be a six-month play… I was really shocked it went so quickly.”
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Freeman, who has practiced regularly at New Jersey hedge fund Volaris Capital, said he celebrated trading success by going out to dinner with his parents in the New York City suburbs, where they live.
The student who at one point they owned more than 6.2% of BBBY about his Freeman Capital Management fund, according to the US Securities and Exchange Commission (SEC), said he raised the $25 million stake from friends and family. His uncle is Scott Freeman, a former pharmaceutical executive who helps manage the FCM fund.
A timeline of 20-year-old USC student Jake Freeman’s investment in $BBBY
— JC Oviedo (@JCOviedo6) August 17, 2022
When his stake in BBBY was revealed last month, he wrote to the company’s board of directors, warning that the retailer was “facing an existential crisis for its survival”. “To ensure its survival, BBBY must reduce its cash burn rate, drastically improve its capital structure and raise cash,” he said in the letter, according to a copy filed with the SEC.
At the same time, he introduced himself to the members of the BBBY Reddit page with a post titled Giving BBBY a chance. “Hi everyone, I’m Jake Freeman,” he said. “I truly believe that the plan proposed by FCM is likely to present a great opportunity for BBBY to succeed. It offers ‘buy-buy-time’.”
Freeman told Redditors he’s “worked in finance for 14 years and has been interested in finance since I was 12.” He said he was particularly interested in “the problem of planar isoperimetry according to the Gaussian measure”.
When he was 16, he co-authored an article entitled Irreducible Risks of Hedging a Bond with a Default Swap.
BBBY shares fell in after-hours trading on Wednesday after Ryan Cohen, chairman of GameStop and a 12% shareholder, announced he plans to sell his entire stake.