Bed Bath and Beyond’s Rise and Fall as a Meme Stock
Bed Bath and Beyond struggled as the pandemic, along with supply shortages, drove customers away and revenue fell. The situation is dire to the point that people are questioning if it can even survive. The company has already laid off hundreds of employees and is closing stores to stay afloat. There were even rumors that stores were not running air conditioning to cut costs. Its Q1 earnings were abysmal: the company’s net loss increased to $348 million and reported a revenue of $1.46 billion while analysis forecasted revenue figures around $1.5 billion. Making matters worse, Bed Bath and Beyond desperately needs the cash as it burns through the remaining capital while having a net debt of $1.3 billion.
Meme Stock Beginnings
In March 2022, billionaire investor Ryan Cohen had a 10% stake in Bed Bath and Beyond. Cohen was famous for being one of the speculative investors who in 2021 invested in meme stocks such as GameStop. On August 16, Bed Bath and Beyond (BBBY) stock shot up 60% in just one day. At one point, shares were trading at $28.60 from $6 in a very volatile trading session. The average trading volume that day was six times higher than the 30-day average on an unusual day, shooting the stock up 440% in just the month of August, showing that many traders were interested in the stock.
There was no good news or financial results from the company and most hedge funds had short positions on the stock. The r/Wall Street Bets Reddit group fueled the frenzy, buying shares which led to rapidly increasing share prices due to the extreme demand. As one of the most heavily shorted stocks on the market (50.7% of public shares were in a short position), a short squeeze occurred and hedge funds were forced to sell their shares at massive losses, further contributing to the rising stock price.
More Turmoil
Ryan Cohen then sold the majority of his venture’s stack into the company. He filed with the SEC and sold 55,103 shares on August 16 and 17, which were worth around $1.4 million at the time. This was the start of the downfall as the stock dropped 20% after the news broke out. The stock again dropped on August 22 due to reports that its suppliers had halted shipping.
To add to the frenzy, on September 5th, Bed Bath and Beyond chief financial officer Gustavo Arnal passed away after jumping from his apartment building in a suicide. Arnal was at the time facing a class action lawsuit for allegedly being involved in a “pump and dump” scheme. The shareholders claimed that they had lost $1.2 billion and that Arnal sold his shares for a higher price after the scheme. Bed Bath and Beyond have argued that these claims are baseless but regardless is evaluating the complaint.
Conclusion
As interest in meme stocks began to rise, Bed Bath and Beyond caught the attention of many redditors. They tried to fight against the hedge funds, who were shorting one of the most heavily shorted stocks on Wall Street. They believed that the stock would climb and wanted to follow the footsteps of Ryan Cohen. But, similar to last year, the meme stock train soon lost steam and BBBY tumbled, revealing the reality of the company’s situation. The company now faces increased scrutiny and troubles in its desperate attempt to keep the lights on.