What a day of trading for Bed Bath and Beyond [BBBY]. The company did little to shed its title as one of the more noteworthy meme stocks yesterday, with shares in the firm soaring by a remarkable 85% at one point, before closing the day up over 34%.
For once, it wasn’t earnings or the prospect of a takeover that sparked such a notable rise. Instead, it all came about because of one person’s newly revealed stake in the company.
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Why did Bed Bath and Beyond shares rise so suddenly?
Ryan Cohen, the co-founder and former CEO of pet supplies retailer Chewy [CHWY], disclosed a 9.8% ownership in the beleaguered domestic retail chain. Cohen, who acts as chairman of fellow meme stock GameStop [GME], also shared a letter with Bed Bath and Beyond’s board with recommendations on how to turn the company around:
“We believe Bed Bath needs to narrow its focus to fortify operations and maintain the right inventory mix to meet demand, while simultaneously exploring strategic alternatives that include separating buybuy Baby and a full sale of the company.”
Cohen also expressed doubts about the company’s current ability to create true shareholder value amid the current large short interest in the firm.
These moves very much echo Cohen’s strategy in gaining significant control at GameStop. First, he disclosed a near 10% stake. Next, a letter urging the firm to improve certain aspects and explore new avenues of growth. And then, finally, ascension to a position of power as chairman of the board — a move that sparked a widespread surge of GameStop stock being bought up.
Cohen has already stated that he isn’t in a position to join Bed Bath and Beyond’s board, but his influence will surely be felt throughout the business. Already, the company has responded to his letter outlining its willingness to “engage constructively around the ideas they have put forth”.
Is Bed Bath and Beyond a good investment?
Ryan Cohen’s large stake in the company certainly bodes well for the future, but right now any investment in Bed Bath and Beyond is inherently risky. The playbook Cohen brought out at GameStop still hasn’t taken full effect, with it actually posting widening losses in its previous quarterly earnings call. As such, there’s no concrete reason to believe that a similar strategy will work for Bed Bath and Beyond.
The rise of ecommerce has actively worked against more traditional retailers, and this was only accelerated by the Covid-19 pandemic. Cohen’s suitability to affect change in the company is arguably on par with anyone else that could have come in, but until wholesale changes are seen by investors, it could be best to avoid for now.
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