Billionaire investor Ryan Cohen cashed out his entire position in
Bed Bath & Beyond Inc.
this week, capping a wild stretch of stock trading and marking the latest sign that meme-stock mania he is still alive.
Mr. Cohen, the co-founder of pet retailer Chewy Inc., developed a deep fan base of individual investors last year after climbing to become chairman of GameStop Corp., the original merchandise of the memes. In March he revealed an activist position in Bed Bath & Beyond, sparking a rally in the stock price.
Many individual investors have followed Mr. Cohen to Bed Bath & Beyond in support of his drive to push for changes to turn the company around. They welcomed his agreement to add three new directors to the board. Then, this week, they watched him unload his stock, some in horror.
Just a few days ago, the stock’s trajectory looked different. Many individual investors began piling into the stock in August, and social media chatter reignited. Trading activity was chaotic at times, marked by trading halts and frenzied activity in the company’s options bets, with many positioning for more volatility in the stock.
““Someone bought it for $30 and someone lost $12 a share to enrich Ryan Cohen.”“
At its peak in August, Bed Bath & Beyond shares soared to $30 intraday, up nearly 500% for the month. They ended Thursday at $18.55down 20% – after Mr Cohen’s offer to sell his shares was revealed – before falling a further 35% in aftermarket trading after securities filings showed he had sold all his shares.
“Someone bought it for $30 and someone lost $12 a share to enrich Ryan Cohen,” said Michael Pachter, an equity research analyst who covers GameStop for Wedbush Securities. “It’s a retail investor who bought the stock.”
Mr. Cohen made a profit of about $60 million on the sale of his shares, based on an analysis of regulatory filings. He declined to comment.
Its huge profits suggest that the meme craze that grew out of the depths of the Covid-19 pandemic is still going strong 18 months after start. And this time, novice investors betting small sums of money aren’t the only ones trading in troubled companies. Mr Cohen’s gains illustrate the ability of larger investors to take advantage of individual investors’ voracious appetite for momentum trading – and make big profits along the way.
Mr. Cohen’s sale adds uncertainty to an already financially troubled company. Bed Bath & Beyond is losing customers, short on cash and operating without a permanent CEO.
However, the financial woes facing the retailer did not seem to faze individual investors, many of whom piled in just before the stock plunged. Their purchases of Bed Bath & Beyond, on a net basis, were a hit the highest amount in history on Tuesday, according to Vanda Research data from 2014, just two days before the stock started to fall. Shares of Bed Bath & Beyond were the top buy for individual investors on brokerage Fidelity on Thursday.
And for a moment it looked like Bed Bath & Beyond might be headed for a massive short, a phenomenon that occurs when a stock rises so much that investors who bet against it are forced to buy back shares, driving the stock even more .
Short sellers, or investors who are betting against the stock, had already started to pull out of their bearish bets this past week as the stock crossed $10 a share and above, according to Igor Dusanivskyi, head of forecast analysis at S3 Partners, technology and a data analytics firm. Meanwhile, new investors were still clamoring to add bearish bets as the stock continued to climb.
Short interest in Bed Bath & Beyond rose to 55% of the stock’s free float on Tuesday, according to S3 Partners. Meanwhile, the average price of Bed Bath & Beyond’s short stock, known as a loan charge, rose to 80%, its highest level since 2022.
By Thursday, any opportunity for a short rally appeared to have begun to fizzle out as stocks fell, prompting some individual investors to unload their own stocks. In online retail communities, some merchants reacted angrily.
“The casino is over,” said individual investor Richard Hofer, 34, who dumped his shares of Bed Bath & Beyond after hearing the news that Mr. Cohen had unloaded his.
In early August, Mr. Hofer, an engineer from Louisiana, invested more than $13,000 in Bed Bath & Beyond stock, using the money from a fund for his wedding next year. He started buying after seeing the chatter explode at WallStreetBets on Reddit and was encouraged by the big bet Mr. Cohen took on Bed Bath & Beyond.
Mr. Hoefer walked away with a profit of about $3,000. “I don’t agree with selling it,” he said, “but I expected a longer ride.”
Write to Caitlin McCabe c firstname.lastname@example.org and Gunjan Banerjee in Gunjan.Banerji@wsj.com
Corrections and enhancements
Ryan Cohen’s move comes roughly five months after taking a majority stake in the company. An earlier version of this article incorrectly said in the headline deck that it was approximately a month after that. (Corrected on August 18)
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