Bed Bath & Beyond stock surges up to 78.8% following the latest bet by a famed joke stock trader.

 Bed Bath & Beyond stock surges up to 78.8% following the latest bet by a famed joke stock trader.

Bed Bath & Beyond shares rose more than 70% on Tuesday as retail investors flocked to the stock following a report indicated activist investor Ryan Cohen is sticking firm on his bet.

According to Reuters, the stock soared as high as 78.8% to $28.60 per share during the Tuesday session, and trading was paused several times due to volatility.

The surge in trade has driven the share price up 440% in the last month.

The document that caused the short squeeze disclosed that Ryan Cohen's investment vehicle, RC Ventures, retained its percentage ownership of Bed Bath & Beyond and maintained its bet that the price of shares in the home goods store would rise to $80.

Cohen, the creator of online pet supplies company Chewy and the chairman of GameStop, purchased a 10% interest in Bed Bath & Beyond in March of this year, as well as call options on 1.67 million shares with strike prices ranging from $60 to $80 that expire in January 2023.

Call options are financial contracts that allow an investor to purchase a share at a specific price and period, implying that Cohen has effectively bet that Bed Bath & Beyond stock will climb to $80 by the beginning of next year.

The stock is now trading at $26.88 in pre-market trading at 6:30 a.m. ET.

Who is Ryan Cohen?

Cohen is a billionaire activist investor from Canada who rose to prominence in the retail investing meme stock community after revealing a 10% investment in GameStop in August 2020, making him the company's largest investor. He joined GameStop's board of directors in January 2021, which contributed to the notorious January meme stock spike.

"When you see his name [Cohen] attached with something, it creates a buzz." "Right now, social media excitement is exploding around Bed Bath & Beyond, and it's spilling over into other equities," said Dennis Dick, a retail trader with Triple D Trading, to Reuters.

WallStreetBets moves

Trading in Bed Bath & Beyond began as soon as markets opened, and by 2:30 p.m. ET, 300 million shares had changed hands.

Other meme stocks that benefited from the short squeeze were meal kit firm Blue Apron, barbecue grill maker Weber, and sports streaming service FuboTV, which all increased by 15% to 53%. GameStop, another business under Cohen's RC Ventures, rose 5%.

Some hedge funds suffered significant losses. On August 11, asset management company FMR sold 99.99% of its Bed Bath & Beyond interest before the stock price skyrocketed.

One Reddit user claims he took out a $27,000 loan to go all in on Bed Bath & Beyond shares nine days ago on Aug. 8—a wager that might have netted him $20,000 if he hadn't withdrew his investment two days later when the price fell.

The short squeeze in Bed Bath & Beyond shares is similar to what occurred in January 2021, when retail traders raised the company's stock to $53.90. Users of the subreddit r/wallstreetbets, an online community on the social news website Reddit, were chiefly responsible for the January short squeeze.

The classic view

Despite the stock surge and the prospect of a stock price treble, Bed Bath & Beyond's internal outlook appears dismal. Its revenues and earnings have been struggling throughout the second part of the previous decade, and its stock has plunged from roughly $80 in 2014 to $4 at the onset of the epidemic.

Following the January 2021 short squeeze and Cohen's March 2022 purchase of the firm, there has been a push to restructure the company's business model and reduce its emphasis.

"We believe Bed Bath has to limit its focus to improve operations and maintain the correct inventory mix to fulfill demand," Cohen said in a letter to the company's board on March 7.

Bed Bath & Beyond's same-store sales fell 24% and revenue fell to $1.46 billion in the company's most recent quarterly results release in 2022. The corporation also stated that it was drowning in debt, with only $107 million cash on hand on its financial sheet.

Neil Saunders, managing director of GlobalData, stated following Bed Bath & Beyond's most recent earnings report on June 29 that interim CEO Sue Gove had inherited a "hot disaster."

"The issue is that the corporation is currently in a bad situation." "It has to fine-tune its recovery approach from a very bad financial position and at a time when the home furnishings sector is in the doldrums," adds Saunders.

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