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Ryan Cohen Filed To Sell His BBBY Stake. But Will The Sale Go Through?

Ryan Cohen has filed to potentially sell his total stake in BBBY. What does this mean for the stock?
  • Ryan Cohen, who owns about 11% of Bed Bath & Beyond shares through RC Ventures, filed to sell his entire stake.
  • However, given Cohen's involvement in BBBY, it's possible he might not go through with the sale.
  • Thanks to heavy trading volumes, it's still possible we'll see another short squeeze soon.
Figure 1: Ryan Cohen Filed To Sell His BBBY Stake. But Will The Sale Go Through?

Figure 1: Ryan Cohen Filed To Sell His BBBY Stake. But Will The Sale Go Through?

Ryan Cohen Filed To Sell His Entire BBBY Stake

Ryan Cohen, who owns about 11% of the total shares of Bed Bath & Beyond  (BBBY) - Get Bed Bath & Beyond Inc. Report, wants to sell. On August 16, he filed a Form 144 with the U.S. Securities and Exchange Commission (SEC) proposing to sell his entire stake in the company.

According to the SEC, Rule 144 permits the "public resale of restricted and controlled securities if a number of conditions are met." Because his fund, RC Ventures, owns more than 10% of the company's voting shares, Cohen is classified as an insider. So his shares are restricted.

To sell restricted or controlled securities in the public market, the SEC requires an exemption from registration requirements.

The form signed by Cohen reads:

 "The filing represents the potential sale of up 7,780,000 common stock and the following call options: 11,257 BBBY CALLS 01/20/23 @$60, 5,000 BBBY CALLS 01/20/23 @$80, 444 BBBY CALLS 01/20/23 @$75."

Will the Sale Really Go Through?

As you'd expect, the impact of the news was not good. Bed Bath & Beyond shares, which had risen nearly 27% during the August 17 session, immediately plunged 12% and fell another 20% in after-hours trading.

However, it's worth noting that the filing is for a potential sale. Therefore, it's possible that Cohen just filed the form to sell his options that expire in January and profit from a strong valuation based on the BBBY "meme rally."

Cohen's bet on Bed Bath & Beyond is more like a long-term investment than simply a speculative trade. Cohen sent a letter to the company's management, demanding strategic changes and making recommendations.

A few months later, former CEO Mark Tritton stepped down from the company, and Ryan Cohen appointed three trusted members to the company's board.

What's Next for BBBY Stock?

When asked about the current volatility in BBBY shares, Bed Bath & Beyond's management told Reuters that the company was "pleased to have reached a constructive agreement with RC Ventures in March and are committed to maximizing value for all shareholders."

Additionally, management said that the team is working "expeditiously over the past several weeks with external financial advisors and lenders on strengthening our balance sheet." Management said that it would not comment again until the end of this month.

The company has been experiencing liquidity and debt problems. With its share price skyrocketing in recent weeks, an eventual equity issuance — in other words, stock dilution — could be the solution to raise some cash for the company to meet its obligations.

Mad Money host Jim Cramer — whom many "meme investors" consider a nemesis — said that Bed Bath & Beyond needs to issue equity immediately to solve its balance-sheet problems.

However, Bed Bath & Beyond's popularity among retail investors has been off the charts lately. It has even overshadowed other meme-stock favorites like GameStop  (GME) - Get GameStop Corporation Report and AMC Entertainment  (AMC) - Get AMC Entertainment Holdings Inc. Class A Report.

In recent weeks, BBBY has been the top ticker on Reddit's most influential stock forum, r/wallstreetbets.

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It's possible that, once the initial shock dies down, meme investors will pile back in.

BBBY is heavily shorted — short positions account for around 41% of its float. Considering the high trading volumes in the stock, chances are good we'll see more short squeezes soon.

(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)