After becoming a meme stock favorite earlier this year, Bed Bath & Beyond’s shares plunged Wednesday, triggered by a sudden turnaround from activist investors.
Investor Ryan Cohen made a filing Monday outlining his option to buy the retailer’s shares at a very high price, sending the stock soaring. as much as 70 percent.
Then on Wednesday, he filed registration papers allowing him to sell all of his 10% stake in the company. Investors reacted by selling shares that fell about 22% in Thursday afternoon trading.
However, the company’s situation has not improved much since then.
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Chief Executive Officer Mark Tritton was sacked in June, net sales continued to decline and supply chain turmoil dragged on.
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For the most recent quarter, the company posted a net loss of approximately $358 million and cash on hand of $140 million, down from more than $1.1 billion a year ago.
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Since announcing the deal with Mr. Cohen, the company’s stock has fallen about 40% as of last week.
Cohen has call options on Bed Bath & Beyond with astronomical strike prices of $60, $75 and $80 per share. (The stock on Wednesday closed at $23.) he revealed his first stake.
But after Bed Bath & Beyond bought back some shares, he ended up owning more than 10% of the retailer, making him a major shareholder. As such, he had to newly disclose the outline of his investment in the company, which he did on Monday night.
filingCohen’s stock option details sent retailers into a frenzy.they Purchases shares of Bed Bath & Beyond for $73 million Reddit’s WallStreetBets board was inundated with memes driving Cohen.
A representative for Cohen did not respond to a request for comment.
Now Cohen wants the ability to sell out. On Wednesday, his investment firm RC Ventures made a required regulatory filing for large shareholders wanting to sell a portion of their stake. (Experts say Cohen could end up selling none, some, or all of his shares.)
“It’s good for him,” said Daniel Taylor, a professor of forensic accounting at Wharton University. “This is prudent risk management and you can sell your shares if you want to secure a huge profit.”
Taylor said things could enter a gray area if Cohen bought shares and disclosed the call just to boost Bedbath & Beyond’s stock and boost earnings. But proving such intent would be difficult.