Skip to main content

BBBY Stock: Ryan Cohen Steps In, Short Sellers Scramble

GameStop’s Chair Ryan Cohen now owns a large chunk of BBBY shares. The stock price has surged as bears run for the hills.

Bed Bath & Beyond stock  (BBBY) - Get Bed Bath & Beyond Inc. Report frequently ranks among the most discussed tickers on Reddit forums.

The stock's latest meme-style move happened on March 7th. In premarket action, shares were up a mind-twisting 85% (see below) after former Chewy CEO and current GameStop chair Ryan Cohen announced that he owns nearly 10% of Bed Bath & Beyond.

Here's what current and potential investors might want to keep in mind about BBBY stock going forward.

Figure 1: Bed Bath & Beyond stock performance on March 7 premarket.

Figure 1: Bed Bath & Beyond stock performance on March 7 premarket.

(Read more from Wall Street Memes: 3 Reasons To Stay Bullish On AMC Stock)

Ryan's background

36-year-old Ryan Cohen was the CEO of Chewy, the pet e-commerce company that he founded when he was only 25 years old. In 2017, he sold Chewy to PetSmart in a $3.3 billion deal to pursue other personal goals.

Then, the investor side of Ryan Cohen's started to gain notoriety. After the sale of Chewy, he invested a large sum in Apple and became the company's largest individual investor, holding around 6 million split-adjusted shares.

By the end of 2020, Cohen had also become the largest single shareholder in GameStop  (GME) - Get GameStop Corporation Report, having acquired 10% of GME's shares and subsequently increasing the ownership percentage to about 13%. These investments were made before GameStop stock’s impressive rally, in late January 2021. Around the same time, the investor was appointed as Chairman of the Board.

Cohen's position in Bed Bath & Beyond

In addition to stock ownership, RC Ventures – the holding owned by Ryan Cohen – also bought out-of-the-money BBBY calls with expiration dates of January 20, 2023. See table below.

Figure 2: RC Ventures transactions during the past sixty days.

Figure 2: RC Ventures transactions during the past sixty days.

Next, Mr. Cohen will likely push for a business transformation to support his investment. Ryan has a solid background in retail and e-commerce, and he has written a letter to Bed Bath & Beyond's board members proposing a number of improvements.

Ryan's suggestions for Bed Bath

According to Mr. Cohen, Bed Bath & Beyond's current restructuring plan is lacking in execution. As a result, the company has not been able to reverse the loss of market share, while it struggles with supply chain issues.

Ryan Cohen suggests that Bed Bath's current strategy of trying to execute dozens of initiatives at once, from infrastructure to cost cutting, “looks far better in a PowerPoint deck than it does in practice”. He also notes that he and much of the market – given the large number of short interest in BBBY – have doubts about the company's ability to create shareholder value.

Mr. Cohen cites his experience with Chewy to suggest a simpler approach that starts with strengthening the company's infrastructure while focusing on inventory fixes in the near term.

Ryan also suggests spinning off buybuy Baby, a subdivision owned by Bed Bath since 2007. This business has good online market penetration, and a sale could ease operational stresses for Bed Bath.

Finally, the investor seems favorable to a full sale of Bed Bath to a well-capitalized buyer, if possible. Doing so could offer shareholders a premium on their investment and give Bed Bath more flexibility to operate away from the public market.

A day later, Bed Bath replied to Cohen's letter:

"Bed Bath & Beyond's Board and management team maintain a consistent dialogue with our shareholders and, while we have had no prior contact with RC Ventures, we will carefully review their letter and hope to engage constructively around the ideas they have put forth."

Is Bed Bath A GameStop Rerun?

The Bed Bath & Beyond story looks similar to GameStop’s in a few ways. Both are strong and established retail brands, but whose businesses have taken a hit from the shifts in retail dynamics — for example, the rise of e-commerce and fading out of malls.

Mr. Cohen has turned a startup online retailer into a multibillion-dollar company, and has helped to reshape GameStop’s business model. Therefore, he seems suited to advise on what could become the next successful turnaround story in retail.

Bed Bath & Beyond stock currently has an outsized short interest of 59% of its float, according to Yahoo Finance. Today’s developments, perceived to be a positive, and heavy bearish activity as of late could combine to create a massive short squeeze.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)