University student earns $110 million from stock trading his favorite Bed Bath & Beyond meme

University student earns $110 million from stock trading his favorite Bed Bath & Beyond meme
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A 20-year-old university student made nearly $110 million selling a stake in struggling retailer Bed Bath & Beyond after its share price surged in a month of frantic trading reminiscent of last year’s meme stock boom.

Jake Freeman, an applied mathematics and economics major at the University of Southern California, bought about 5 million shares of Bed Bath & Beyond in July, according to a regulatory filing. pathetic gain and the ouster of the chief executive felt his share price plummet.

Freeman bought his stake for less than $5.50. Tuesday, Bed Bath & Beyond increased to more than $27 per share. As the stock rose, Freeman sold $130 million worth of stock from his TD Ameritrade and Interactive Brokers accounts.

Freeman’s sale was timely. Shares of Bed Bath & Beyond plunged more than 20 percent Thursday after investor and meme-stock champion Ryan Cohen. published on Wednesday in the evening, he said he intended to sell his almost 12 percent stake in the company.

“I certainly didn’t expect such a brutal rally to the top,” Freeman said in an interview Wednesday. “I thought it would be a game that would last more than six months. . . I was very surprised that he rose so fast.”

After selling the shares, Freeman went to lunch with his parents around New York City, where they live, and flew to Los Angeles to return to campus on Wednesday, he said.

Jake Freeman

Jake Freeman: ‘I’m really shocked it’s taken off so fast’ © Jake Freeman

Freeman’s initial stake cost about $25 million, which he said was raised mostly from friends and family. He has been investing for years with his uncle, former pharmaceutical executive Dr Scott Freeman. The two recently founded an activist stake in a publicly traded pharmaceutical company called Mind Medicine.

Freeman also said he interned for years at Volaris Capital, a New Jersey hedge fund. Just before his 17th birthday, Freeman and its founder, former Credit Suisse executive Vivek Kapoor, published a paper titled “The Irreducible Risks of Bond Hedging with Default Swaps.”

Freeman amassed a more than 6 percent position in Bed Bath & Beyond through Freeman Capital Management, a fund registered in the cowboy town of Sheridan, Wyoming.

Freeman, who announced his position in July, felt intransigent message to the retail board. According to him, the company “is facing a current crisis for survival”. It added that it should “reduce cash burn rate, dramatically improve capital structure and accumulate cash.”

Shares of the New Jersey chain, known for running cavernous stores stocked with vacuum cleaners, towels and kitchen supplies, have soared fivefold in the past month, even after a dismal earnings report on June 29.

It reported that sales in the second quarter fell 25 percent compared to the same period in 2021, while its net loss widened from $51 million to $358 million. Its cash position fell to $107 million from $1 billion at the beginning of the year.

Bed Bath & Beyond is one of the few meme stocks that gained traction in early 2021, but received less attention than Cohen-chaired video game retailer GameStop and movie theater chain AMC.

The rise in its share price has been fueled by interest from retail investors attracted by the stock’s small free float and by a large number of short sellers betting that the share price will fall.

These two features are of interest to retail investors who frequent Reddit forums. This means they can try to create a “short squeeze” by pushing the stock price up and forcing professional investors to open their short positions, which pushes the stock even higher.

It was a separate announcement by Cohen, co-founder of pet food retailer Chewy, on Monday that sent shares on a tear Tuesday. He disclosed that he had bought a large number of call options on Bed Bath & Beyond — derivatives that could provide a windfall if the stock rises in value.

Cohen did not respond to a request for comment.

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