Why Bed Bath & Beyond shares surged this week, then plunged.

Posted on

Five months after saying he was a major shareholder in Bed Bath & Beyond, the activist investor Ryan Cohen sold out of the beleaguered retailer completely.

Mr. Cohen’s investment firm disclosed on Thursday that it had sold off the entirety of its stake in the company, just days after the Bed Bath & Beyond’s shares surged as much as 70 percent as small investors also piled in to the stock. Mr. Cohen, who founded the online retailer Chewy and is the chairman of GameStop, has become a favorite of individual investors who have driven meme stock mania.

Mr. Cohen’s fund, RC Ventures, first revealed that he owned a 9.8 percent stake in Bed Bath & Beyond in March, and called for several changes at the company, including a sale of the Buy Buy Baby brand. The home-goods chain settled with him a few weeks later, adding three of his nominees to the board.

But the retailer has continued to struggle since then: Its chief executive, Mark Tritton, was ousted in June, and it reported a net loss of about $358 million in the most recent quarter with only $140 million in cash on hand, down from more than $1.1 billion a year before. As of last week, its shares had fallen about 40 percent since it announced its deal with Mr. Cohen.

Its stock-market fortunes were reinvigorated earlier this week after Mr. Cohen disclosed that he had purchased stock options with strike prices of $60, $75 and $80 per share, well above the stock price, which was closer to $12 a share at the end of last week.

While Mr. Cohen had outlined those options when he disclosed his initial stake, Bed Bath & Beyond has since bought back some of its shares, making him a major shareholder and requiring him to file updated forms.

The filing sent retail traders into a frenzy. They bought $73 million in Bed Bath & Beyond stock on Tuesday and flooded Reddit’s WallStreetBets board with memes urging Mr. Cohen on.

The quick turnaround proved financially beneficial to Mr. Cohen. He sold a portion of his investment in Bed Bath & Beyond on Tuesday, at prices ranging from about $18 to $26 a share and more on Wednesday at $23 to $29. He also sold his much-discussed call options Wednesday.

In all, Mr. Cohen appears to have earned nearly $57 million on his Bed Bath & Beyond investment, grossing $178 million on his sale this week of a stake in the company that cost him $121 million earlier this year to acquire. He lost just over $1.6 million on his options bet.

“Good for him,” said Daniel Taylor, a professor of forensic accounting at the University of Pennsylvania’s Wharton School. “That’s prudent risk management.”

Things might get into a gray area, Professor Taylor said, if Mr. Cohen had bought the stock and disclosed the calls solely to lift Bed Bath & Beyond’s share price and flip a profit. But that sort of intent would be hard to prove, he said.

Shares of the retailer fell more than 40 percent in after-hours trading on Thursday, adding to a drop of 20 percent during the regular trading session, following news that Mr. Cohen had taken his money out of the company.

Stephen Gandel contributed to this report

Jasaseosmm.com Smm Panel is the best and cheapest smm reseller panel Buy Twitter Verified badge for instant Instagram likes and followers, Buy Verification Badge, Youtube views and subscribers, TikTok followers, telegram services, and many other smm services. telegram, and many other smm services.