Bed Bath & Beyond meme shares tumble as billionaire Cohen to dump stake

A shopping cart is seen inside a Bed Bath & Beyond store in Manhattan, New York City, US, June 29, 2022. REUTERS/Andrew Kelly/File Photo

Aug 18 (Reuters) – Bed Bath & Beyond Inc (BBBY.O) shares fell 15% on Thursday after billionaire investor Ryan Cohen announced plans to sell his entire stake in the struggling retailer, following a stunning rally in meme stocks this month.

Cohen’s investment vehicle RC Ventures plans to sell 9.45 million shares worth $148.6 million, a filing revealed late Wednesday. The second-largest investor also proposed a sale of its call options in January with strike prices between $60 and $80. read more

The announcement of those bullish bets had sparked interest from retail investors, fueling record trading in the stock on Tuesday.

The stock was trading at $19.4 in early trading, after hitting $30 on Wednesday and soaring nearly 360% this month.

Brokerage Wedbush downgraded the company’s rating to “underperform” and reaffirmed its $5 target, saying the stock looks “disconnected from fundamentals” at its current valuation.

“The news that Ryan Cohen is selling his stake in BBY seems to have shocked meme stocks,” said David Jones, a strategist at Capital.com.

“Contrary to the madness of the past, (retail) traders seem more inclined to follow institutional wisdom than to blindly compete for companies with bad fundamentals.”

A rebound in the broader stock market has revived speculative single stock trading among individual investors after volatile markets turned them away from risky bets earlier this year. read more

So far in August, the soaring stock of Bed Bath & Beyond had burned a hole of more than $600 million in the pockets of those who bet against the stock, S3 Partners said Wednesday.

Short-term interest rates, however, have risen to 55% of the company’s free float as bearish investors managed to find attractive entry points, the analysis firm said.

The company’s ticker was trending high on investor-focused social media platform stocktwits.com.

The company added three new directors to its board after it reached an agreement in March with activist investor Cohen, who is also chairman of GameStop (GME.N).

The household goods retailer ousted its CEO and reported a slump in sales in June. read more

Reporting by Medha Singh and Anisha Sircar in Bengaluru; Editing by Vinay Dwivedi

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