And just like that, 📈nother meme stock craze has come and gone.
What happened: Just five months after activist investor Ryan Cohen took on a ~10% position in Bed Bath & Beyond (BBBY), his sudden exit has sent shares spiralling by ~40%.
Catch up: Cohen, who founded the online retailer Chewy, is the chair of GameStop and has become a (now formerly) beloved character in the meme stock world.
Earlier this week, Cohen launched the BBBY stock back into r/WallStreetBets relevance after sharing he had purchased stock options with strike prices between $60 and $80 per share (a bet that the stock would rise ~5-7x).
- Reddit investors loved it, and piled into BBBY as part of a huge short squeeze (which hurts big institutions with bets on the stock failing), sending shares soaring by ~70%.
As the stock surged on the news, Cohen immediately started unloading his position at prices ranging from US$18 to $29 per share.
- With an average purchase price of $15.34, Cohen earned nearly $57 million (and lost just $1.6 million on his options bet), but the stock has since continued to tank.
What’s next: Nothing, really, unless someone can prove Cohen chose to disclose his stock options purely to lift BBBY’s share price and flip a profit (which is very difficult to prove).
- But judging by a massive Reddit thread, boy, are some investors pissed. Some say they’re done with Cohen, going as far as threatening to sell their GameStop stock.
Why it matters: This situation falls into the pretty grey area surrounding meme stock trading, in which the hype around one company (or one individual in this case) can create millions of dollars in profits overnight without generating any real underlying value.
Wait, there’s more: It’s not a true meme stock story unless there’s at least one college student whose newfound wealth makes you question your existence: Jake Freeman banked $110 million by trading 4.69 million BBBY shares with $25 million (of his uncle's money, so not quite a rags-to-riches story).