BBBY to the moon… and came back

Posted by

What goes up, falls back.

Since late July, meme stock fever has had a moderately more contained new outbreak, led by struggling retailer Bed Bath & Beyond (once known simply as the store where everyone discovers how expensive trash cans are). Following a staggering August rally, shares of BBBY flopped nearly 20% on Thursday.

Prior to the drop, which we’ll unpack in a bit, BBBY enjoyed incredible gains from retail trading in August—surging 400% from a July low. This week, individual traders bought a record $73.2 million of the stock on Tuesday, and followed it up by buying $58.2 million worth on Wednesday, according to data compiled by Vanda Research. On Wednesday, 1.4 million BBBY options contracts were traded and the stock saw more activity than market giants Tesla or Amazon.

  • Also this week: A college student (with $25 million to invest) made $110 million in profit selling his BBBY shares as they surged Tuesday.

But what goes up, etc., etc., and BBBY experienced a dramatic change in fortune on Thursday.

So what happened?

Much of the hype around Bed Bath & Beyond that can be explained via simple human logic stems from the activity of billionaire investor and GameStop Chairman Ryan Cohen. In March, Cohen—who’s seen as a Pied Piper for meme stocks—disclosed a nearly 10% stake in Bed Bath & Beyond through his firm RC Ventures.

That, along with a filing on Tuesday revealing Cohen’s bullish BBBY call options, were seen by meme stock traders as a sign of Cohen’s confidence in the company. On Wednesday, though, RC Ventures filed a notice with the SEC to allow it to sell the entirety of its nearly 9.45 million shares (including options) in the company.

Ensuing headlines sparked a sell-off in Bed Bath & Beyond and led some high-profile investors to call for an SEC investigation into Cohen’s actions. A filing late Thursday afternoon revealed Cohen did in fact exit his position, and BBBY shares plummeted 45% in extended trading (on top of the 20% drop during market hours).

Like other meme stocks, Bed Bath & Beyond’s share price appears decoupled from its IRL outlook. Analysts have raised concerns about liquidity, and four Wall Street banks have recommended clients sell the stock in the last two weeks.


Comments are closed.