Stunning rally in
shares ground to a halt last week when one of the company’s largest shareholders cashed out.
Now a crowd of individual investors say they hope to ride out the worst of the sell-off.
Even as Bed Bath & Beyond collapsed on Friday worst one day retreat everindividual investors continued to support the stock on social media platforms such as Reddit, Discord and
Many posted diamond-and-hand emoticons — Internet shorthand for someone who’s holding on to their investments even as pressure to sell mounts. Others tagged their posts with “HODL”: hold on for dear life.
Their message to the world? We don’t give up.
Will Lobach, a 39-year-old investor from New Jersey, said he hopes to use the sale as a way to add to his Bed Bath & Beyond holdings.
He owns more than 250 shares of the struggling retailer. Having collected them at an average price of about $6.50, he is still about 70% more than his initial investment. Shares of Bed Bath & Beyond fell 41% on Friday to $11.03.
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Mr. Lobach said he was not fazed by the stock’s volatility last week. He also owns stakes in meme stocks
AMC Entertainment Holdings Inc.
both of which are known for their wild swings.
“I’m proud of him,” Mr. Lobach said of billionaire investor Ryan Cohen.
whose sale of his share caused the sell-off in Bed Bath & Beyond stock last week.
“Cohen’s army is right behind him,” Mr. Lobach added, noting that he supports the sale and believes that Mr. Cohen is not yet done with Bed Bath & Beyond. “It was amazing to be a part of this moment in history.”
Mr. Cohen, co-founder of a pet goods retailer
has developed a devoted following of individual investors, who hailed his rapid ascent last year from activist investor to chairman of GameStop. Many people piled into shares of Bed Bath & Beyond after it revealed a significant stake in the company in March and issued a letter to its board demanding major changes.
David Simpson, 30, of Seattle, said he has committed to keeping his investment in Bed Bath & Beyond until at least 2023, by which time he expects the stock to rise to around $200.
He was undeterred by the news that Mr. Cohen was selling his stake. In fact, he says his belief in the Bed Bath & Beyond business has only grown stronger. He mentioned Mr. Cohen’s role in growing Chewy from a small startup into a company that later to be acquired by PetSmart for $3.35 billion, a deal that at the time was the largest e-commerce acquisition ever.
“My instincts tell me the same is true” of Bed Bath & Beyond, Mr. Simpson said, adding that he believed the company would be able to strengthen its financial position by the end of the year.
Bed Bath & Beyond is seeking a $375 million loan to accumulate cash and help pay down debt, The Wall Street Journal previously reported. In June, the company said sales for the current quarter were down 20% from a year earlier.
The decision of individual investors is the latest twist in the meme craze which has lasted far longer than many professional investors and analysts could have predicted. Some individual investors say they have good reason to believe the stock will rebound.
Many also continue to hold on to what they believe will be massive short squeezea phenomenon that occurs when a stock rises so much that investors who bet against it are forced to buy back shares, causing the stock to rise even more.
Right now, those betting on stocks face an uphill battle.
On Friday, the selloff that affected Bed Bath & Beyond spread to other meme stocks, with GameStop losing 3.8%, AMC Entertainment falling 6.6% and
shedding 11%. The S&P 500 ended down 1.3%.
The data also shows that pressure from short sellers continues to increase.
About half of Bed Bath & Beyond’s shares that were available for trading Friday afternoon were shorted, according to Igor Dushanovsky, head of forecast analysis at S3 Partners, a technology and data analytics firm.
“It’s been a rollercoaster week,” Mr. Dusaniwski said in an email, noting that the value of short sellers’ positions fell by hundreds of millions of dollars in the first half of the week, only to jump by hundreds of millions of dollars on Thursday and Friday.
Wall Street analysts also warn that shareholders may be in for more pain.
Wedbush Securities analyst Seth Basham said he believes shares of Bed Bath & Beyond should trade around $5 — 55% below where they closed on Friday. He cut his rating on the stock to “underperform” from “neutral” in a note after Mr. Cohen announced plans to sell his stake publicly on Wednesday.
Even if the company succeeds in achieving goals such as fixing its inventory and supply chain problems, its stock has risen so much that the risk-reward ratio for investors remains “disproportionately skewed downward,” Mr. Basham added.
Shares of Bed Bath & Beyond are still up 122% for the quarter, compared with the S&P 500, which is up 12%.
Wells Fargo analyst Zachary Fadem, who covers Bed Bath & Beyond, maintained a $3 price target on the stock — 73% below the price it closed on Friday.
Among Mr. Fadem’s concerns: Traffic at Bed Bath & Beyond stores and Web traffic to its site appear to be slowing. The company is also in a financially vulnerable position. It is working with outside advisers to try to strengthen its balance sheet.
“We believe the writing is on the wall that BBBY stock has once again become disconnected from economic reality,” Mr. Fadem said in a note.
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