Meme stocks are back. This time it’s Bed Bath and Beyond ($BBBY). This is a crazy story. On 8/14/2022, a Form 3 disclosure was posted online. Ryan Cohen, who led the meme stock movement for $GME, disclosed that he owned out of money call options on more than 1.6 million Bed Bath & Beyond shares, with strikes ranging from $60 to $80, signaling his bullishness of the stock. BBBY 0.00 had been trading around $6 dollars at the beginning of August. But before RC’s disclosure, the stock was trading $12 ish on 8/12 due to excitement on /r/wallstreetbets. After the disclosure, the stock shot up to $20 on 8/16 and $23 on 8/17 at close. On 8/16 after market close, it was revealed through an SEC filing that Ryan Cohen intended to sell his BBBY 0.00 holdings. On Thursday 8/18 after market close in another filing, it was revealed that he had sold all his holdings on 8/16 and 8/17 with prices from $18.65-$29.22. He made ~$68.1 millions from this trade. In summary, with WSB excitement, he pumped BBBY 0.00%↑ further with his options holding disclosure on 8/14 and dumped all his BBBY 0.00%↑ holdings 2 days later with a huge gain. Is this even legal?
Ryan Cohen first acquired the stock at ~$15/share in Q1 2022 and sent the BBBY 0.00 board a letter demanding changes. People assumed that he is an activist investor and he would help BBBY 0.00 improve their business and strategy to unlock shareholder value. People didn’t expect a pump-and-dump scheme like this. Now he walked away with a very handsome profit. But retail investors are left to hold the bag as BBBY 0.00 is currently trading at $9.76, down 50+% from the peak last week. He was already a billionaire before this trade. Is the profit he made from BBBY 0.00 really worth losing all the trust and respect retail investors have for him?
There are tons of discussions on /r/wallstreetbets about $BBBY. People seem to be very bullish and the trading volume went from 11.46 million shares on 8/1 to the peak of 395 million shares on 8/16. I couldn’t really find a very good reason why people like this stock. The company has a negative book value, is bleeding hundreds of millions of dollars a year and only has ~$100 million dollars of cash at hand. It seems kind of silly to YOLO into this stock. They can go bankrupt anytime and equity holders would be wiped out. Based on the trading volume, it appears that many retail investors bought the stock in the past week at the peak. This is basically gambling. If people want to gamble, perhaps they should go to Vegas instead. At least they would get some entertainment value out of it.