A Bed Bath & Beyond store is seen on June 29, 2022 in Miami, Florida.
Joe Raedle | Getty Images News | Getty Images
Shares of Bed Bath & Beyond soared on Tuesday as social media-active retailers piled into the stock, buoyed by news that GameStop Chairman Ryan Cohen made another bet on the retailer in difficulties
Shares of Bed Bath & Beyond soared more than 70% to an intraday high of $28.04 in midday trading Tuesday amid multiple halts due to volatility. Shares closed the session up 29%.
A regulatory filing late Monday showed that Cohen’s venture capital firm RC Ventures bought long out-of-the-money call options on more than 1.6 million shares of Bed Bath & Beyond at strike prices between $60 and $80.
Investors benefit from calls when the underlying securities rise in price. The strike price is where the option holder can buy the security, meaning Cohen is betting that Bed Bath & Beyond can rise to $80 per share. Shares closed Monday at $16.
The call options Cohen bought expire in January 2023.
The new purchase caught the attention of retail traders on Reddit’s WallStreetBets forum. The BBBY ticker became the most popular mention in the chat room on Tuesday, according to alternative data provider Quiver Quantitative.
Trading volumes at Bed Bath & Beyond exploded Tuesday with more than 160 million shares changing hands as of noon ET. The company has only about 80 million shares outstanding, according to a regulatory filing.
Cohen first disclosed that he held a nearly 10% stake in Bed Bath & Beyond through RC Ventures in early March. FactSet says its holdings stood at 11.82% at the end of March.
GameStop’s president then wrote a letter to then-Bed Bath CEO Mark Tritton, saying he believed the home goods chain was struggling to reverse declining market share and navigate the chain’s woes of supply He also urged the retailer to consider selling its Buybuy Baby chain.
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Later in March, Bed Bath said it reached an agreement with the activist’s company to add three people picked by Cohen to its board of directors, effective immediately.
Just three months later, Bed Bath abruptly replaced Tritton as chief executive in June, appointing restructuring expert and independent director Sue Gove as her interim successor. This came after the company suffered another quarter of sluggish sales and heavy losses.
Now under Gove, Bed Bath is trying to turn around the ailing business, but analysts are not sure it will succeed. The company is discontinuing one of its own brands created under Tritton, CNBC reported earlier this month, and there could be more.
Creating in-house brands for bedding and kitchen accessories was the foundation of Tritton’s turnaround plans, which he drew from his experience at Target. But he ended up stripping Bed Bath of items customers were looking for and investing heavily in things that weren’t selling as well.