Jake Freeman is a 20-year-old college student at the University of Southern California and Bed Bath & Beyond just made bank for him. Last month, he bought five million shares of Bed Bath & Beyond for under $5.50 a share. As a result, he owned 6% of the company. On Tuesday, the stock leapt to $27 a share. He sold his shares from his TD Ameritrade and Interactive Brokers accounts for a total of more than $130 million. The news was reported in regulatory filings discovered by the Financial Times.
“I certainly didn’t expect such a vicious rally upwards,” he told the Financial Times. “I thought this was going to be a six-months-plus play; I was really shocked that it went up so fast.”
Freeman raised the initial $25 million investment from friends and family. He and his uncle, a former pharmaceutical executive, kept their eye on it. Freeman had experience of his own. He interned at Volaris Capital, a New Jersey-based hedge fund.
After he purchased the stock last month, he sent a letter to Bed Bath & Beyond’s board of directors. He warned that the company was “facing an existential crisis for its survival.” He told them that they needed “to cut its cash-burn rate, drastically improve its capital structure and raise cash.”
Earnings reports in June showed that stock fell, and it led to the firing of their CEO. But since the start of August, shares have risen 300%. It rose another 11.8% on Wednesday, after Freeman sold his shares.
Bed Bath & Beyond Stock Soars
Financial analysts attribute the boom to the “meme stock” craze. Investors drive up share prices to force hedge funds who have shorted the stock to either cut their losses and sell or buy up more shares. The action further inflates the value. Bed Bath & Beyond saw such action.
It begins in Reddit chat threads. A couple of notable stocks that spawned the activity were AMC and Gamestop. It’s left several companies in a bit of a mess. And things are quickly changing at Bed Bath & Beyond.
On Thursday, Ryan Cohen filed paperwork to sell his entire stake in the company. Cohen is the chairman of Gamestop and the co-founder of Chewy. He owns 9.45 million shares of Bed Bath & Beyond. When news broke that he was getting rid of his stake, shares fell 21% to $18.27.
It beats buying a lottery ticket or gambling if you know what you’re doing. Sure, one lucky man hit that Mega Millions jackpot this summer for a cool $1.28 billion. But the odds are pretty terrible. Jake Freeman’s Bed Bath & Beyond story has Hollywood all over it. Maybe his next fortune comes from selling the rights to his story.