Shares of Bed Bath & Beyond cratered after opening on Thursday amid the news that the company’s second-largest investor plans to cash out amid a meme stock rally.
A regulatory filing revealed that activist investor Ryan Cohen, the founder of pet supply retailer Chewy, planned to sell his 11.8% stake in the company within the next three months. Cohen’s initial purchase of the shares five months ago had driven other investors to follow suit and buy the stock, but now, some are selling after the news broke that Cohen is planning to offload his holdings.
Bed Bath & Beyond shed nearly a quarter of its value on Thursday morning after the market opened and is now trading at $17.59 per share. Despite the hefty selloff, the stock is worth far more than it was just a few weeks ago.
The retailer’s stock is up more than 250% from a month ago, when it was trading at just $5 per share. While Cohen’s purchase was notable, hordes of smaller-scale traders (many sourced from the Reddit forum WallStreetBets) were the main reason why the stock exploded in popularity.
WallStreetBets has tracked Cohen’s moves in the past. In 2020, Cohen disclosed that he had taken a 10% ownership stake in GameStop, becoming its chairman. Following the news, meme stock traders piled onto GameStop’s stock and caused a meteoric rise.
Cohen isn’t the only big investor who is selling Bed Bath & Beyond holdings. It was revealed on Thursday that Jake Freeman, a 20-year-old college student, sold 5 million shares this week and netted a massive $110 million profit.
Freeman purchased the giant holding last month for $25 million, buying in when the price was less than $5.50 per share. He told the Financial Times he was able to raise the investment capital by raising money from family and friends and was surprised by this month’s explosive rally.
“I certainly did not expect such a vicious rally upwards,” Freeman said. “I thought this was going to be a six-months-plus play. … I was really shocked that it went up so fast.”
After making the purchase last month, Freeman wrote a letter to the company’s board of directors warning that Bed Bath & Beyond was “facing an existential crisis for its survival” and that it needed to “cut its cash-burn rate, drastically improve its capital structure, and raise cash.”
Despite the news from Cohen and Freeman, others on the WallStreetBets forum encouraged investors to hold on to their shares, predicting that the price could continue to balloon and that the rally is not yet over.
“Buy the dippp,” one user posted on a thread about Bed Bath & Beyond. “Sold my kids and got more stock,” another joked.
“I understand some of us are probably pissed off at each other and maybe ashamed of ourselves for selling when we panicked, and that’s okay. If this isn’t for you, we understand that. You can stand on the sideline and cheer for us,” a user wrote. “It will be a long fight. We are here for the war, and not just this one day battle. This will be small loses like this one in the after hours along the way, and it’s only temporary.”
Other meme stocks have ballooned alongside Bed Bath & Beyond’s rise.
Blue Apron, a meal kit company, saw shares of its stock rise by nearly 40% in the past five days while FuboTV, a streaming company, had its shares increase by more than 10% in that same period of time. Both stocks faltered on Thursday, with Blue Apron falling by more than 10% and FuboTV dropping by about 6.5%.