Student earns $110 million in trading meme stock favorite Bed Bath & Beyond

Student earns $110 million in trading meme stock favorite Bed Bath & Beyond

A 20-year-old college student has made about $110 million in profit selling a stake in struggling retailer Bed Bath & Beyond, after its stock price surged during a month of frenzied trading reminiscent of last year’s meme stock boom.

Jake Freeman, a major in applied mathematics and economics at the University of Southern California, acquired nearly 5 million shares of Bed Bath & Beyond in July, according to regulatory filings, after disappointing earnings and the CEO’s impeachment hit the stock price. plummeted.

Freeman bought his share for less than $5.50 a share. On Tuesday, Bed Bath & Beyond rose to over $27 a share. As the stock rose, Freeman sold over $130 million worth of shares from his TD Ameritrade and Interactive Brokers accounts.

Jake Freeman

Jake Freeman © Jake Freeman

“I certainly didn’t expect such a vicious rally to the top,” Freeman said in an interview on Wednesday. “I thought this was going to be a six-month play… I was really shocked that it went so fast.”

After selling the shares, Freeman went to dinner with his parents in the New York City suburb where they live, and on Wednesday he flew to Los Angeles to return to campus, he said.

Freeman’s initial bet cost about $25 million, which he said was largely raised by friends and family. He invested for years with his uncle, Dr. Scott Freeman, a former pharmaceutical director. The two recently built an activist stake in a publicly traded pharmaceutical company called Mind Medicine.

Freeman also said he spent years interning at a New Jersey hedge fund, Volaris Capital. Just before his 17th birthday, Freeman and his founder, Vivek Kapoor, a former director of Credit Suisse, published a paper entitled “Irreducible Risks of Hedging a Bond with a Default Swap”.

Freeman acquired his more than 6 percent stake in Bed Bath & Beyond through Freeman Capital Management, a fund registered in the cowboy town of Sheridan, Wyoming, according to the filings.

When announcing his position in July, Freeman sent an uncompromising message to the retailer’s board. The company, he said, “was facing an existential crisis in order to survive”. It had to “lower its cash burn rate, drastically improve its capital structure and raise money,” he added.

Shares of the New Jersey-based chain — known for operating cavernous stores stocked with vacuum cleaners, towels and kitchen gadgets — have increased fivefold in the past month, even after its grim June 29 earnings report.

It reported that second quarter revenues were down 25 percent compared to the same period of 2021, while net loss rose to $358 million from $51 million. The cash position had shrunk to $107 million, from $1 billion at the start of the year.

Bed Bath & Beyond is one of the few meme stocks that gained popularity in early 2021, but has received less attention than GameStop, the video game retailer, and AMC, the movie theater chain.

The share price has risen thanks to the interest of private investors, attracted by the small free float of the share and a significant number of short sellers who are betting that the share price will fall.

These two features typically attract the attention of retail investors who frequent Reddit forums. It means they can try to create a “short squeeze” by driving the stock price higher and forcing professional investors to close out their bearish positions, which only pushes the stock higher.

Freeman’s sale was well timed. Shares of Bed Bath & Beyond fell 17 percent in after-hours trading on Wednesday after Ryan Cohen, GameStop chairman and a major shareholder of the homeware retailer, announced he plans to sell his entire nearly 12 percent stake in the company. .

It was a separate reveal Monday from Cohen, co-founder of pet food retailer Chewy and a meme stock champ, who let the stock shed a tear on Tuesday. He revealed that he had bought a large number of call options in Bed Bath & Beyond – derivatives that can provide a windfall as a stock rises in value.

Cohen did not respond to a request for comment.

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