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A 20-year-old college student made it big at Bed Bath & Beyond at the right time, earning nearly $110 million in the meme-stock favorite after its stock price quadrupled and before its more lively interested party indicated plans to sell everything.
Maths graduate Jake Freeman had built up a 6.2 per cent stake in the struggling home goods chain in July. He bought 4.96 million shares at $5.50 each through a Wyoming-based holding company he created. On Tuesday, a day when the stock rose above $27 a share before closing at $20.65, up 31 percent, he sold it all.
The Financial Times reported that his holdings were worth more than $130 million at the time, making him about $110 million.
His timing was impeccable: within 24 hours, activist investor Ryan Cohen indicated that he intended to sell the 9.8% stake acquired through his venture capital firm RC Ventures. It was Cohen’s interest in Bed Bath & Beyond that lit up online message boards like Reddit’s r/WallStreetBets, sending the stock price soaring. So when reports surfaced Wednesday afternoon that Cohen had filed a Form 144 with the Securities and Exchange Commission (a notice of intent to sell stock), the stock fell in after-hours trading. It closed Thursday at $18.55, down 19.6 percent, and fell another 35 percent after hours.
Why Bed Bath & Beyond Shares Soared More Than 350 Percent This Month
Cohen has a devoted following among small retail investors because of his key role in the GameStop frenzy. In late 2020 and early 2021, traders on Reddit and other online communities snapped up the video game retailer’s stock, hoping to capitalize on a company that many institutional investors had written off. Shares rose nearly $5 to more than $480, an impressive rise for a declining brick-and-mortar business. The rise fueled froth and volatility, and the meme stock was born.
Small investors joined forces and went looking for other companies that Wall Street was shorting or betting against. The strategy outlined on Reddit used what’s known as a short squeeze, in which those who bet against stocks, usually hedge funds, are forced to buy stocks to close out their position.
Cohen founded the online pet food company Chewy and later became the chairman of the board of GameStop. His plan to revive the video game retailer was fueled by an unexpected burst of online enthusiasm for the company last year, sending the stock price soaring and making it the first of many memes Others include movie theater chain AMC, smartphone maker BlackBerry and telecommunications company Nokia.
Freeman attended the University of Southern California, where he studied applied mathematics and economics, according to the Financial Times. the report he said he raised funds for Freeman Capital’s seed investment from friends and family. His LinkedIn profile indicates he has been an intern at New Jersey-based hedge fund Volaris Capital.
In a July 21 letter to the company’s board, he said Bed Bath & Beyond “is facing an existential crisis for its survival.” It encouraged him to stop spending cash so quickly, to restructure his capital and raise more funds.
“Freeman Capital’s plan for the realignment of [Bed Bath & Beyond] consists of two crucial legs: reducing debt and raising capital,” he wrote.
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Bed Bath & Beyond has been struggling for years. Its first-quarter sales were 25 percent lower than a year earlier, as the retailer posted a net loss of $358 million. It also has $1.37 billion in debt.
As the stock soared more than 300 percent while gaining attention online, Freeman took the opportunity to liquidate his holdings, SEC filings show, selling $130 million worth of stock on Tuesday .
Freeman told financial news site MarketWatch that he “didn’t expect stocks to take off the way they did,” adding that he now believes he has too much downside risk.
“I expected it like [Bed Bath & Beyond] structure your balance sheet better so that value is unlocked. I felt on these high levels [the stock] it just wasn’t worth it from a risk/reward standpoint.”
According to the Financial Times, Freeman and his uncle Scott Freeman, a former pharmaceutical executive, have separately taken an activist stake in drug company Mind Medicine, a New York-based company that focuses on psychedelic-inspired drugs.