A 20-year-old college girl went big with Bed Bath & Beyond at the right time, making nearly $110 million off the meme stock favorite after its stock price quadrupled and before the most vibrant stakeholder signaled plans to sell it all.
Jake Freeman, a math major, owned a 6.2 percent stake in the struggling homewares chain in July. He bought 4.96 million shares for $5.50 each through a Wyoming-based holding company he founded. On Tuesday — a day when the stock peaked above $27 a share before closing at $20.65, a 31 percent increase — he sold everything.
The Financial Times reported that his assets were worth more than $130 million at the time, earning him about $110 million.
His timing was impeccable: within 24 hours, activist investor Ryan Cohen indicated that he planned to sell the 9.8 percent stake he acquired through his venture capital firm RC Ventures. It was Cohen’s interest in Bed Bath & Beyond that lit up online message boards like Reddit’s r/WallStreetBets, driving the stock price up. So when reports emerged Wednesday afternoon that Cohen had filed a Form 144 with the Securities and Exchange Commission — a notice of intent to sell stock — the stock slipped in after-hours trading. It closed Thursday at $18.55, down 19.6 percent, and plunged another 35 percent after hours.
Why Bed Bath & Beyond Shares Rise More Than 350 Percent This Month
Cohen has a devoted following among small retail investors because of his key role in the GameStop frenzy. In late 2020 and early 2021, traders on Reddit and other online communities looted the video game retailer’s shares, intending to take advantage of a company that many institutional investors had written off. The stock rose from nearly $5 to over $480 — a staggering increase for a brick-and-mortar company in decline. The run-up created froth and volatility, and the meme stock was born.
Small investors joined forces and started looking for other companies that Wall Street was shorting or betting against. The strategy outlined on Reddit used what’s called a short squeeze, where those betting against a stock — usually hedge funds — are forced to buy stocks to close out their position.
Cohen founded the online pet food company Chewy and later became the chairman of GameStop. His plan to revive the video game retailer was buoyed last year by an unexpected explosion of online enthusiasm for the company, sending its stock price skyrocketing and making it the first of many meme stocks. Others were the cinema chain AMC, smartphone maker BlackBerry and telecom company Nokia.
Freeman attends the University of Southern California, where he studies applied mathematics and economics, according to the Financial Times. The report said he was raising money for Freeman Capital’s initial investment from friends and family. His LinkedIn profile indicates that he did an internship at New Jersey-based hedge fund Volaris Capital.
In a July 21 letter to the company’s board of directors, he said that Bed Bath & Beyond “is facing an existential crisis for its survival”. He encouraged it to stop burning up cash so quickly, restructure the capital and raise more money.
“Freeman Capital’s plan for the realignment of [Bed Bath & Beyond] consists of two crucial parts: deleveraging and raising capital,” he wrote.
Bed Bath & Beyond has been struggling for years. First quarter sales were 25 percent lower than the previous year as the retailer posted a net loss of $358 million. It also has $1.37 billion in debt.
When the stock rose more than 300 percent when it attracted attention online, Freeman took the opportunity to liquidate his holdings, SEC filings show, selling $130 million worth of shares on Tuesday.
Freeman told financial news site MarketWatch that he “didn’t expect the stock to rise this much,” adding that he now believes it carries too much downside risk.
“I would have expected that if [Bed Bath & Beyond] its balance sheet better structured to unlock value. I felt on those elevated levels [the stock] was not worth it from a risk/return perspective.”
According to the Financial Times, Freeman and his uncle Scott Freeman, a former pharmaceutical director, have separately acquired an activist interest in the pharmaceutical company Mind Medicine, a New York-based company focused on psychedelic-inspired drugs.