College student Jake Freeman earns $110 million trading Bed Bath & Beyond meme stock
The Financial Times reported that his holdings were worth over $130 million at the time, earning him around $110 million.
His timing was impeccable: within 24 hours, the activist investor Ryan Cohen has indicated that he intends 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 discussion forums like Reddit. r/WallStreetBets, driving up the stock price. So when reports emerged Wednesday afternoon that Cohen had deposit a Form 144 with the Securities and Exchange Commission – a notice of intention to sell stock – the stock slipped after hours of trading. It closed Thursday at $18.55, down 19.6%, and plunged another 35% after hours.
Why shares of Bed Bath & Beyond are up more than 350% this month
Cohen has a devoted following among small retail investors due to his key role in the GameStop frenzy. In late 2020 and early 2021, traders from Reddit and other online communities took the video game retailer’s shares, intending to capitalize on a company that many institutional investors had delisted. The stock rose from nearly $5 to over $480 – a stunning rise for a declining bricks-and-mortar company. The rise fueled moss and volatility, and the meme stock was born.
Retail investors joined forces and sought out other companies that Wall Street was shorting or betting against. The strategy described on Reddit used what is known as a short squeeze, in which those betting against a stock – usually hedge funds – are forced to buy shares to close out their position.
Cohen founded the online pet food company Chewy and later became chairman of the board of GameStop. His plan to relaunch the video game retailer was buoyed by an unexpected outburst of online enthusiasm for the company last year, driving its stock price higher and making it the first of many meme stocks. Others include cinema chain AMC, smartphone maker BlackBerry and telecommunications company Nokia.
Freeman attended the University of Southern California, where he studied applied mathematics and economics, according the Financial Times. The report said he raised funds for the initial Freeman Capital investment from friends and family. His LinkedIn profile says he interned 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.” He encouraged him to stop burning his 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 steps: reducing debt and raising capital,” he wrote.
The stock market is in bearish territory. What does that mean?
Bed Bath & Beyond has been struggling for years. Its first-quarter sales were 25% lower than a year earlier, with the retailer posting a net loss of $358 million. He also has $1.37 billion in debt.
When the stock soared more than 300% as it caught the eye online, Freeman took the opportunity to liquidate his holdings, according to SEC filings, selling $130 million worth of stock on Tuesday. .
Freeman told financial news site MarketWatch that he “didn’t expect the stock to skyrocket the way it has,” adding that he now thinks it poses too much risk to the decline.
“I expected that [Bed Bath & Beyond] better structured its balance sheet to unlock value. I felt at these high levels [the stock] Wasn’t worth it from a risk/reward perspective.
According to the Financial Times, Freeman and his uncle Scott Freeman, a former pharmaceutical executive, separately took an activist stake in pharmaceutical company Mind Medicine, a New York-based company that focuses on psychedelic-inspired drugs.