A 20-year-old university student has made a gain of around $110million selling a stake in struggling retailer Bed Bath & Beyond, after its share price soared during a month of trading frantic reminiscent of last year’s stock market boom.
Jake Freeman, an applied math and economics student at the University of Southern California, acquired nearly 5 million shares in Bed Bath & Beyond in July, according to regulatory filings, after dismal gains and the ousting of its chief executive sent its stock price plummeting.
Freeman bought his stake at less than $5.50 per share. Tuesday, Bed bath and beyond jumped to over $27 per share. As the stock soared, Freeman sold more than $130 million worth of stock from his TD Ameritrade and Interactive Brokers accounts.
“I certainly didn’t expect such a vicious rally,” Freeman said in an interview Wednesday. “I thought it was going to be a game over six months. . . I was really shocked that it went up so fast.
After selling the shares, Freeman went to dinner with his parents in the New York suburb where they live and on Wednesday flew to Los Angeles to return to campus, he said.
Freeman amassed his more than 6% position through Freeman Capital Management, a fund registered in the cowboy town of Sheridan, Wyoming, according to the documents. He said he raised money from friends and family and thought the struggling company could restructure its debt.
After revealing his stance in July, Freeman sent an uncompromising message to the retailer’s board. The company, he said, was “facing an existential crisis for its survival”. It needed “to reduce its cash burn rate, significantly improve its capital structure and raise funds”, he added.
Shares of the New Jersey-based chain – known for operating cavernous stores stocked with vacuum cleaners, towels and kitchen gadgets – have quintupled over the past month, even after the grim earnings report on June 29.
It reported that its sales fell 25% in the second quarter compared to the same period of 2021, while its net loss widened to $358 million from $51 million. Its cash had fallen to $107 million from $1 billion at the start of the year.
Bed Bath & Beyond is one of a handful of meme stocks that rose to popularity in early 2021, but garnered less attention than GameStopthe video game retailer, and AMC, the movie theater chain.
The rise in its share price was driven by interest from retail investors attracted by the stock’s low free float and a large number of short sellers betting that the stock price will fall.
Both of these features tend to pique the interest of retail investors frequenting Reddit forums. This means they can try to set up a “short squeeze” by pushing the stock price higher and forcing professional investors to unwind their bearish positions, which only drives the stock higher.
The sale of Freeman came at the right time. Shares of Bed Bath & Beyond fell 17% in after-hours trading on Wednesday after Ryan Cohen, chairman of GameStop and a major shareholder in the homewares retailer, revealed he plans to sell all of his nearly 12% stake in the company. .
It was a separate disclosure Monday from Cohen, co-founder of pet food retailer Chewy and champion meme stock, that sent the stock in tears on Tuesday. He revealed that he had bought a large number of call options in Bed Bath & Beyond – derivatives that can generate a windfall if a stock’s value rises.
Cohen did not respond to a request for comment.