How a 20-year-old USC student made $110 million from a Bed Bath & Beyond stock dump at the perfect time

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Last Updated on August 20, 2022 by Bitfinsider

Bed Bath & Beyond’s stock price fell from more than $26 per share to under $20 in a matter of minutes around 2:00 p.m. ET on Tuesday.

The stock (BBBY), which has risen 440% in the last month as a result of a Reddit-fueled squeeze, sank for an hour or two before resuming its ascent to the $27 range.

While some Reddit users snatched up the hot shares, others searched for answers.

“I believe that million share dump was [Freeman Capital Management],” user DFWRestaurantGuy posted a few hours after the drop.

“That drop at 2 p.m. with 1 million shares, I’m guessing was FCM liquidating the remainder of their shares,” they added.

“Did Jake Freeman liquidate all of his BBBY?” “Am I reading this correctly?” LunchOptimal5325 made a comment.

The stock price drop was not caused by Freeman.

The 20-year-old USC student announced on Reddit that he had resigned from his $130 million job before noon.

“The significant increase in BBBY’s share price, combined with the fact that I am leaving for school tomorrow, played critical roles in closing the Position,” Freeman explained in a Reddit post.

So, who is this 20-year-old who made an estimated $110 million from the sale of Bed Bath & Beyond?

Freeman, a University of Southern California applied mathematics and economics major, purchased more than 5 million shares of Bed Bath & Beyond in July.

He made the purchase shortly after the company fired CEO Mark Tritton in late June following a dismal first-quarter financial report that showed sales had dropped 25%, revenues had dropped to $1.46 billion, and the company was drowning in $3.28 billion in debt with only $107 million cash on its balance sheet.

Ryan Cohen, the founder of online pet goods retailer Chewy and the chairman of GameStop, purchased a 10% stake in Bed Bath & Beyond in March.

Cohen is a popular figure on Reddit investing forums after purchasing a 10% stake in GameStop and joining the company’s board of directors in January 2021, triggering the infamous meme stock rally.

With $25 million raised from friends and family, Freeman purchased shares in Bed Bath & Beyond when the stock price was less than $5.50 per share.

He bet it all on Bed Bath & Beyond, becoming the company’s second largest non-institutional investor after Cohen, with a 6.21% passive stake.

After investing, Freeman sent a scathing message to the home goods retailer’s board, warning that the company is “facing an existential crisis for its survival.”

Without providing a plan to turn around the company’s declining cash flow or inject capital, Freeman advised Bed Bath & Beyond to cut its debt and raise more capital through a convertible loan issuance.

Despite falling sales and rising debt, the price of Bed Bath & Beyond stock increased fourfold on Tuesday, and less than a month after investing, Freeman sold $130 million in stock from his TD Ameritrade and Interactive Brokers accounts.

“I certainly did not expect such a vicious upward rally,” Freeman told the Financial Times. “I expected this to be a six-month-plus project… “I was astounded at how quickly it rose.”

The selloff occurred at the ideal time.

A regulatory filing from Cohen’s venture capital firm RC Ventures revealed plans to sell its entire 11.8% stake within the next 90 days after trading closed on the day Freeman sold his shares, sending shares down 15% in after-hours trading.

At 6:30 a.m. ET, shares of Bed Bath & Beyond are trading at $19.77.

Freeman was unconcerned about the price drop.

A regulatory filing from Cohen’s venture capital firm RC Ventures revealed plans to sell its entire 11.8% stake within the next 90 days after trading closed on the day Freeman sold his shares, sending shares down 15% in after-hours trading.

At 6:30 a.m. ET, shares of Bed Bath & Beyond are trading at $19.77.

Freeman was unconcerned about the price drop.

After selling his shares, he went out to dinner with his parents in their New York City suburb before flying out to Los Angeles on Wednesday to return to campus, according to Freeman.


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Disclaimer: Above are some affiliate links and we may collect a share of sales or other compensation from the links on this page.
Disclaimer: The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, legal, tax or other advice. Investing in or trading cryptocurrency or stocks comes with a risk of financial loss.

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