Ryan Cohen: Bed Bags & Beyond

From August 18-20, Bed Bath and Beyond shares dropped 38%. 

ETH dropped nearly 18%.

The market overall fell just ~3%.

One takeaway? Ryan Cohen sneezes and all of memestock culture catches a cold. 

If you don’t know Ryan, he moves markets like Elon (by appealing to the same sub-Redditers) but gets a fraction of the coverage (the price you pay for not also being a rocket scientist making humans multiplanetary. Or, perhaps, for only being a single digit billionaire as opposed to a triple digit one). 

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Ryan co-founded Chewy – the online pet retailer that defied the odds by getting big at a time when Pets.com had spectacularly failed and Amazon was seen as the behemoth online retailer no one could go up against. 

His second act has been as an activist investor, targeting old, retail businesses into which he thinks he can breathe new, digital life.

His first mark was GameStop, which he began buying up in August 2019. 

A year later, the Wall Street Bets sub-Reddit noticed that 140% of all outstanding GME shares had been shorted – a clear opportunity for a short-squeeze – while Ryan, simultaneously, pushed GameStop management to shift to a more digital-first business model.

(I talk about GameStop’s new gameplan in this conversation with Robbie Ferguson, co-founder of Immutable X, the layer 2 blockchain solution partnered with GameStop for their entrance into digital retail and NFTs.)

Ryan became Chairman of the GME board, and in January 2021 Wall Street Bets ignited, with retail investors running up the stock to $483 – 190x its April 2020 low of $2.47, executing said short-squeeze, and toppling Melvin Capital.

CNBC lost their mind. 

Robinhood was caught in the crosshairs.

And Cohen established his spot as internet folk hero.

Earlier this year, it looked like he was poised to do it again. 

The billionaire bought up 9.8% of all Bed Bath & Beyond (BBBY) shares and the stock surged 100%. 

But, so far, this fairytale hasn’t had its happy ending. Instead of becoming Chairman of the board, Cohen reversed course, dumping his entire stake in the stock on August 16th and sending it crashing two days later when folks realized what had happened.

On Reddit investors vented their fury.

The Wall Street Journal speculated he may have violated SEC law.

Pundits celebrated the downfall.

From folk hero to hated flavor of the week.

The diss-of-choice for many has been pointing out that just two months ago, Ryan took to Twitter to lament “failed executives mak[ing] millions in risk free compensation while shareholders are left holding the bag.”

He’s just done the same thing, they say.

Ehhhh. Ryan’s point is about bad executive’s getting crazy compensation packages and board members enabling it because they haven’t actually put their own capital into the stocks of the companies on which they have board seats. 

Ryan put his money on red, won, and cashed out for reasons – wait for it – we still don’t know. 

But I’ll give the critics this: the optics here aren’t good. Hours before he began dumping his nearly 8 million shares in the company, Cohen filed a required update to his form 13D stating he had done no trading in BBBY over the last 60 days.

Wall Street Bets grabbed hold of the filing and noted that it also revealed Cohen still held nearly 2 million call options for January 2023 with strike prices as high as $80. And it was this news that seemed to cause the 86% single-day runup in the stock that Cohen sold into, netting $60 million. 

In short, Cohen made millions dumping stock on his own fans, who were buying because of him. 

Oof.

But here’s the thing: Cohen’s average cost basis on his BBBY shares was $15. The first time the stock pumped above $15 since his purchases was during this August rally and, specifically, after his disclosure came out. 

Let’s say Cohen really had lost faith in BBBY management and was looking to exit his position.

What was he supposed to do?

Wait for the stock to crash and burn over time while his bags fell alongside those of 1,000 Reddit traders? For what? Solidarity? While more doomed investors piled into the stock on the basis of his involvement?

My best guess? Cohen hit a wall with BBBY management, wanted out, and took the first opportunity he had to sell at a profit. It just unfortunately happened to be during a stock surge that he had unintentionally caused. 

There are no heroes in capitalism and (when it’s working), that’s the point. You live and die on your merits and the whims of the markets and the memelords.

Better to learn that lesson sooner rather than later.

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