College student makes $110M trading shares of Bed Bath & Beyond

A 20-year-old college student make $110 million by selling his stake in retailer Bed Bath & Beyond after the company’s stock price surged over a one-month period this summer — an echo of last year’s “meme stock” boom.

Jake Freeman, who is studying applied mathematics and economics at the University of Southern California, bought 5 million shares in Bed Bath & Beyond in July at just under $5.50 a share. He owned around 6% of the company as a result of his investment.

On Tuesday, the stock price soared to more than $27 a share. Regulatory filings reviewed by Financial Times showed that Freeman sold more than $130 million worth of stock using his TD Ameritrade and Interactive Brokers accounts.

“I certainly did not expect such a vicious rally upwards,” Freeman told FT. “I thought this was going to be a six-months-plus play…I was really shocked that it went up so fast.”

Freeman said that the initial $25 million stake that he bought in the company was made possible by raising money from friends and family.

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Freeman told FT that he has been investing alongside his uncle. Dr. Scott Freeman, who is a former pharmaceutical executive.

Freeman has also interned at Volaris Capital, a New Jersey-based hedge fund.

When he was 16 years old, Freeman co-wrote a paper alongside Volaris founder Vivek Kapoor, a former Credit Suisse executive, titled “Irreducible Risks of Hedging a Bond with a Default Swap.”

After buying up Bed Bath & Beyond stock last month, Freeman sent a letter to the company’s board of directors, warning that the retailer was “facing an existential crisis for its survival” and that it needed to “cut its cash-burn rate, drastically improve its capital structure, and raise cash.”

In late June, the company released an earnings report which showed that its year-over-year revenue and net income numbers for the previous quarter fell considerably.

The underwhelming earnings report triggered the ouster of Mark Tritton as chief executive officer.

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Nonetheless, Bed Bath & Beyond stock has exploded in recent weeks. Since the start of the month, shares in the company have rose more than 300%. On Wednesday alone, the stock soared 11.8% on heavy volume.

Analysts attribute the rise in stock price to the meme stock craze in which retail investors drive up the share price in order to force hedge funds who have shorted the stock to either cut their losses and sell or buy up more shares — thus inflating the stock price further.

The retail investors hatched their plan on Reddit chat groups, sending the stock price of struggling firms such as GameStop and AMC to unimaginable heights during the pandemic.

Bed Bath & Beyond shares fell 21% to $18.27 in morning trading on Thursday after activist investor and meme stock champion Ryan Cohen filed paperwork saying that he intends to sell his entire stake in the company.

Cohen, the chairman of GameStop and the co-founder of online pet store Chewy, plans to divest the 9.45 million shares that he owns in the firm. He first revealed his roughly 10% ownership stake in the company back in March.