A 20-year-old American university student has made a $110m (£91m) profit on a month-long bet on meme stock Bed Bath & Beyond.
Jake Freeman and his family bought nearly 5 million shares of the struggling U.S. home goods retailer for less than $5.50 a share in July for a total outlay of about $25 million .
After a nearly 500% rise in the stock, sparked by intense chatter about the stock on Reddit message boards, including several posts by Freeman, he sold it for more than $130 million, crystallizing the great benefit
They rose as high as $28 on Tuesday, when Freeman is understood to have sold most of his stake. Shares of Bed Bath & Beyond, trading under the ticker BBBY, fell to $23 on Wednesday and fell another 14% in premarket trading Thursday to $19.70.
Meme stocks are those that skyrocket regardless of the success of a business, thanks to hype on message boards and social media. They rose to prominence early last year when shares in struggling companies such as US retailer GameStop soared, fueled in part by a campaign to punish hedge funds betting their value would fall.
While those stocks eventually pulled back, the trend in meme stocks has rebounded this summer, with BBBY stock leading the charge.
Freeman, a student of applied mathematics and economics at the University of Southern California, said he had been “surprised” by the speed of the stock’s rise.
“I certainly didn’t expect such a vicious rally to the upside,” Freeman told the Financial Times in an interview. “I thought it would be a work of more than six months… I was very surprised that it went so quickly.”
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Freeman, who has held regular internships at hedge fund Volaris Capital in New Jersey, said he celebrated the trading success by going out to dinner with his parents in the New York City suburbs where they live.
The student, who at one point owned more than 6.2% of BBBY through his Freeman Capital Management fund according to US Securities and Exchange Commission (SEC) filings, said he raised the share of $25 million from friends and family. His uncle is Scott Freeman, a former pharmaceutical executive who helps manage the FCM fund.
A timeline of 20-year-old USC student Jake Freeman’s $BBBY investment
— JC Oviedo (@JCOviedo6) August 17, 2022
When his stake in BBBY was revealed last month, he wrote to the company’s board warning that the retailer was “facing an existential crisis for its survival”. “To achieve its survival, BBBY must reduce its cash burn rate, dramatically improve its capital structure and raise cash,” he said in the letter, according to a copy filed with the SEC.
At the same time, he introduced himself to members of the BBBY Reddit page with a post titled Giving BBBY a chance. “Hi everyone, I’m Jake Freeman,” he said. “I think the plan proposed by FCM probably offers a great opportunity for BBBY to succeed. It provides ‘buy-buy time.’
Freeman told Redditors that he had “worked in the financial industry since he was 14 and had been interested in finance since he was 12.” He said he was particularly interested in “the plane isoperimetry problem under Gaussian measure”.
When he was 16 he co-authored a paper called Irreducible Risks of Hedging a Bond with a Default Swap.
BBBY shares fell on Wednesday after Ryan Cohen, GameStop’s chairman and 12% shareholder, revealed that he planned to sell his entire stake.