The saga of struggling retailer Bed Bath & Beyond (BBBY) keeps getting curiouser and curiouser.
Shares of the company have surged more than 60% in the past week and soared nearly 250% in the past month thanks to meme investors on Reddit. Those self proclaimed “apes” have been touting the fact that Ryan Cohen, the Chewy (CHWY) founder and GameStop (GME) chairman, had taken a nearly 10% stake in the company just a few months ago.
But it now appears Cohen is preparing to unload his shares in the retail chain.
Cohen’s RC Ventures said in a Securities and Exchange Commission filing Wednesday that the firm intended to sell up to 7.78 million shares of Bed Bath & Beyond as well as more than 16,000 call options that gave RC Ventures the right to buy more shares. The planned sale represents the vast majority of Cohen’s stake in the company.
Bed Bath & Beyond’s stock plunged more than 25% in early trading Thursday.
Before the surprising news about Cohen’s pending sale, bullish traders had been squeezing bearish short sellers who were betting against Bed Bath & Beyond by borrowing shares and selling them in hopes of eventually buying them back at a lower price. As the stock climbed higher, the potential losses for the shorts grew.
It’s unclear why RC Ventures is now seemingly heading for the exits. Cohen was not immediately available for comment.
But in his most recent tweet to his more than 320,000 followers on August 12, Cohen joked “At least her cart is full 🌝” in response to a CNBC story that a Loop Capital analyst was cutting his price target on Bed Bath & Beyond to $1. The photo for the story showed a Bed Bath & Beyond shopper pushing a cart stuffed with merchandise.
More trouble ahead?
“We were pleased to have reached a constructive agreement with RC Ventures in March and are committed to maximizing value for all shareholders,” Bed Bath & Beyond said in a statement Wednesday.
“We are continuing to execute on our priorities to enhance liquidity, make strategic changes and improve operations to win back customers, and drive cost efficiencies,” the statement continued, “all to restore our company to its heritage as the best destination for the home, for all stakeholders.”
The company added that it has “been working expeditiously over the past several weeks with external financial advisors and lenders on strengthening our balance sheet” and that it plans to update investors later this month.
Bed Bath & Beyond always seemed to be an odd choice for a meme stock. Other than the backing of Cohen, who has won raves from rabid GameStop fans, there was little for investors to be excited about.
“News that Ryan Cohen may be selling his stake … appears to have spooked the meme stock faithful. Unlike the frenzy of the past … traders seem more inclined to follow institutional wisdom than to blindly battle for companies with poor fundamentals,” David Jones, chief market strategist with trading platform Capital.com, said in a report.
Bed Bath & Beyond is losing money, sales are tumbling, and the company announced in June that CEO Mark Tritton, who joined from Target (TGT) in 2019 to try to turn things around, was being pushed out as the chain continues to struggle.
“The exact reasons for Cohen ditching his stake are not yet known,” Neil Saunders, managing director of GlobalData, said in a report. “However, the extent of the problems at Bed Bath & Beyond are likely to have played a part in his reasoning.”
“The selling of the stake will only further undermine confidence in the ailing chain,” Saunders added. “Almost every metric at Bed Bath & Beyond is negative.”
CNN Business’ Allison Morrow contributed to this story