Former hedge fund manager Whitney Tilson is sounding the alarm on popular meme stock Bed Bath & Beyond Inc BBBY and calling out Ryan Cohen’s investment in the company. Here’s what Tilson has to say.
What Happened: In an email Wednesday, Tilson highlighted the “unwarranted run-up” in retailer Bed Bath & Beyond.
“I think (Bed Bath & Beyond) is in a death spiral because it likely doesn’t have enough liquidity to build inventory for the holidays and will therefore have to file for bankruptcy,” Tilson said.
Tilson predicted Wednesday that shares would fall back under $10 very soon.
After market close Wednesday it was revealed that investor Cohen, the founder of Chewy CHWY and chairman of GameStop Corp GME, might be selling his entire stake in the retailer.
Benzinga reported Wednesday that Cohen’s firm RC Ventures had filed an intent to sell 9,450,100 shares of Bed Bath & Beyond, representing its entire stake, via an SEC filing. The filing represents the sale of up to 7.78 million shares and shares represented by call options.
In a Thursday afternoon amended SEC filing, Bed Bath & Beyond said Cohen's stake in the retailer is now zero.
“Cohen’s trading patterns sink to high heaven, and may be a classic pump and dump,” Tilson said.
On Monday, Cohen revealed in a Form 3 filing that he had bought out-of-money call options on Bed Bath & Beyond with strike prices of $60, $75 and $80 that expire in January 2023.
“This highly aggressive, bullish-seeming bet caused the stock to soar on Tuesday,” Tilson said.
Tilson said an amended 13D filing from Cohen showing ownership of 9.45 million shares was unwarranted, as it was unchanged from his prior 13D filing from March 25.
“So I think he filed it to cause a further run-up in the stock. Having successfully pumped the stock up 100% to 200% in a couple day, Cohen is dumping/has dumped it on the unsuspecting retail investors who foolishly got caught up in the hype he generated.”
Tilson calls Cohen and the move “a total disgrace.”
Why It’s Important: Tilson argued that Cohen’s 11.8% stake in Bed Bath & Beyond helped fuel the strong interest in the stock among the WallStreetBets crowd on Reddit.
Tilson said he filed a complaint with the SEC asking the regulator to investigate Cohen.
Tilson said he has never done this before and reported Cohen’s activity as “manipulation of a security” and “pump and dump scheme.”
“I hope the SEC investigates,” Tilson said.
Cohen took a stake in Bed Bath & Beyond earlier this year and pushed for changes including at the board level a plan to sell the buybuy BABY brand.
Tilson used his email to tip his hat to Jake Freeman, a 20-year-old student who made $110 million from an investment in Bed Bath & Beyond.
Tilson notes that Freeman “played the stock perfectly.”
Read Benzinga’s exclusive interview with Freeman here.
BBBY Price Action: Bed Bath & Beyond shares are down 21.13% to $14.63 in after-hours trading on Thursday. Shares have traded between $4.38 and $30.06 over the last 52-weeks and are up 18% year-to-date in 2022.
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