Ryan Cohen’s $60m Bed Bath U-turn sparks ire from even stock investors

[ad_1]

An exterior view shows a Bed Bath & Beyond store in Novi, Michigan, U.S., January 29, 2021. REUTERS/Emily Elconin

Join now for FREE unlimited access to Reuters.com

Aug 19 (Reuters) – Investors flooded social media platforms such as Reddit on Friday with criticism of Ryan Cohen’s sale of his stake in Bed Bath & Beyond Inc. (BBBY.O)blaming him for helping fuel a meme stock market rally only to walk away with a $60 million profit.

The billionaire investor revealed on Thursday that he had sold his 9.8% stake in the struggling home goods retailer, nearly five months after hoarding it and pushing for changes. In response, the company ousted its chief executive, changed some directors, and agreed to explore the possibility of getting rid of its baby products unit. Read more

Cohen is expected to make a pretax profit of between $55 million and $60 million on the stock sale, according to a Reuters review of regulatory filings and a person familiar with the matter.

Join now for FREE unlimited access to Reuters.com

Cohen didn’t give a reason for the U-turn and didn’t respond to requests for comment. Last year, he built a following of loyal individual investors who bet on his turnaround of video game retailer GameStop Corp. (GME.N)some of whom expressed fury and disbelief after following his lead on Bed Bath only to see him cash in sharply.

Cohen sold its Bed Bath stock on Tuesday and Wednesday after rising 300% in August amid a speculative rally in meme stocks, a popular reference to stocks traded by investors primarily based on social media hype rather than on their economic fundamentals.

Shares of Bed Bath & Beyond, which briefly hit $30 this month, ended Thursday at $18.55, down 20% after filings revealed Cohen was planning to sell his shares. It plunged another 44% in after-hours trading after filings showed it had sold all of its shares. Read more

The stock was on track to open 43% lower on Friday, erasing all of the week’s gains.

“The writing is on the wall that Bed Bath & Beyond’s stock has once again decoupled from economic reality,” Wells Fargo analyst Zachary Fadem said.

Ryan Bennett, a 43-year-old farmhand in Beloit, Wisconsin, told Reuters he lost more than $40,000 because he followed Cohen in buying shares of Bed Bath.

“I feel like I took my hard-earned money out of my pocket and put it straight into Cohen’s,” Bennett said.

Bed Bath said in a regulatory filing on Thursday that it was working with outside financial advisers and lenders to strengthen its balance sheet, an admission it needs to raise capital to stay afloat. The company had a mountain of long-term debt totaling $1.38 billion and only $107.5 million in cash at the end of May, according to its latest financial disclosure.

The investor reaction raises questions about whether Cohen will continue to exert a strong influence on the stock meme faithful. On Wallstreetbets, the Reddit forum frequented by these investors, some lamented their losses and Cohen’s role.

“After reading what Ryan Cohen just did I hope you all understand that he is not one of us,” wrote one of the posters that goes by the name of Ronpm111.

Shares of GameStop, in which Ryan has a 12% stake and is chairman, have fallen 20% since he disclosed his sale of Bed Bath shares. This has raised questions among many investors, including Bennett, as to whether selling Cohen’s stock to Bed Bath will affect GameStop’s status as a stock meme.

“I don’t know if I can trust him to have a stake in GameStop. I’ll probably be looking to get out of it,” Bennett said.

Join now for FREE unlimited access to Reuters.com

Reporting by Krystal Hu and Angelique Chen in New York and Svea Hebst-Bayliss in Rhode Island; Additional reporting by Deborah Sophia in Bengaluru; Editing by Greg Roumeliotis and Jacqueline Wong

Our standards: The Thomson Reuters Trust Principles.

Leave a Comment