A college student raked in a $110 million profit on Bed Bath and Beyond after investing $25 million in the meme stock
Bed Bath and Beyond shares had spiked on August 16 after Cohen confirmed he still held bullish call options on the stock. Cohen helped spark GameStop’s surge in January 2021 — and he kick-started the wider meme-stock boom — by investing in the video-game retailer and pushing for changes at the company.
How a 20-year-old USC student netted $110m from a Bed Bath and Beyond stock dump at exactly the right time
Shares in Bed Bath and Beyond surged more than 70% on Tuesday as retail investors flocked to the meme stock.
At around 2:00 pm ET in the afternoon on Tuesday, the share price of Bed Bath and Beyond dropped from more than $26 a share to below $20 in a matter of minutes.
The stock (BBBY), which has soared 440% over the past month as part of a Reddit-fueled squeeze, floundered for an hour or two before jumping back up to the $27 range.
As some Reddit users quickly scooped up the hot shares, others looked for answers.
“That million share dump was [Freeman Capital Management] I believe,” user DFWRestaurantGuy posted a couple of hours after the drop.
“That drop at 2 pm with 1 million shares my guess was FCM liquidating the rest of their shares.” they added.
“Did Jake Freeman sell all his BBBY? Am I reading this right?” another user, LunchOptimal5325, posted.
It wasn’t Freeman who triggered the drop in stock price.
The 20-year-old USC student posted on Reddit that he had exited his $130 million position before noon.
“The significant appreciation of BBBY’s share price combined with the fact that I am leaving for school tomorrow played critical roles in closing the Position,” Freeman wrote in a post on Reddit.
But some users weren’t convinced.
In a roundup of the day’s trading, a user wrote in a 5.7k upvoted post: “Some whale…dumped his entire holding of $BBBY dropping the price from ~$27 down to ~$20. That’s right, Freeman Capital Holdings dumped a position worth ~6% of $BBBY.”
Even as others corrected the post saying Freeman claimed to sell his shares before noon, others were incredulous.
“I think he had something to do with the afternoon dump as well, but that’s just speculation,” WeirdSysAdmin wrote.
So who is this 20-year-old who netted a rough $110 million from his selloff of Bed Bath and Beyond?
Who is Jake Freeman and how did he do it?
An applied mathematics and economics major at the University of Southern California, Freeman bought more than 5 million shares in Bed Bath and Beyond in July.
He made the buy shortly after the company ousted its CEO Mark Tritton following a dismal first-quarter financial report in late June showing that sales plunged 25%, revenues fell to $1.46 billion, and the company was drowning in $3.28 billion in debt with only $107 million cash on its balance sheet.
Freeman’s buy-in came months after Ryan Cohen, the founder of online pet goods retailer Chewy and the chairman of GameStop, bought a 10% stake in Bed Bath and Beyond in March.
Cohen is a much-loved figure on Reddit investing forums after he bought a 10% stake in GameStop and joined the company’s board in January 2021, in part triggering the infamous meme stock rally.
Freeman acquired his shares in Bed Bath and Beyond when the price of the stock was below $5.50 a share with $25 million he raised from friends and family.
He placed it all on Bed Bath and Beyond and became the second largest non-institutional investor in the company, after Cohen, with a 6.21% passive stake.
Freeman wrote a scathing message to the home goods retailer’s board after investing, warning the company is “facing an existential crisis for its survival.”
Freeman advised Bed Bath and Beyond to cut its debt and raise more capital through a convertible loan issuance, without providing a plan to turn around the company’s declining cash flow or injecting capital.
But despite plummeting sales and rising debt, the price of shares in Bed Bath and Beyond still went up fourfold on Tuesday, and less than a month after Freeman bought in, he sold $130 million worth of stock from his TD Ameritrade and Interactive Brokers accounts.
“I certainly did not expect such a vicious rally upwards,” Freeman told the FT. “I thought this was going to be a six-months-plus play…I was really shocked that it went up so fast.”
The selloff came at the right time.
After trading closed on the day Freeman sold his shares, 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—sending shares down 15% in after-hours trading.
Bed Bath and Beyond shares are now at $19.77 at 6:30 am ET in pre-market trading.
The price drop certainly didn’t concern Freeman.
After selling his shares, he went for dinner with his parents in the suburb of New York City where they live before flying out to Los Angeles on Wednesday to return to campus, Freeman told the FT.
“I am truly going to miss being able to say ‘I am the second largest non-institutional shareholder of Bed Bath and Beyond,’ but I am certainly going to be shopping at [Bed Bath and Beyond] tomorrow,” Freeman wrote in a Reddit post.
Freeman has now built up an activist stake in a publicly traded pharmaceutical company called Mind Medicine.
He did not respond to Fortune‘s request for comment.
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A college student raked in a $110 million profit on Bed Bath and Beyond after investing $25 million in the meme stock
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- A college student made a $110 million profit on Bed Bath and Beyond stock in August 2022.
- Jake Freeman’s fund revealed a 6.2% stake in the retailer in late July, then sold it weeks later.
- Bed Bath and Beyond, a meme stock, surged as high as $27 and ended the year below $3.
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A 20-year-old college student pocketed an estimated $110 million profit by selling Bed Bath and Beyond shares in August 2022. He capitalized on the ailing home-wares retailer becoming a meme stock and skyrocketing in value within a matter of days.
Jake Freeman, the boss of Freeman Capital Management, revealed that he owned almost 5 million Bed Bath and Beyond shares, or 6.2% of the company, in a Securities and Exchange Commission filing on July 21. He sold the entire position by August 16, another filing shows.
Bed Bath and Beyond stock more than tripled in price from under $6 to over $20 during that period, as retail traders piled in hoping it would skyrocket in value like GameStop, AMC, and other meme stocks. Freeman spent about $25 million on his stake, or less than $5.50 a share, and sold it for north of $130 million, the Financial Times reported.
“I certainly did not expect such a vicious rally upwards,” Freeman told the newspaper. “I thought this was going to be a six-months-plus play,” he continued, adding that he was “really shocked that it went up so fast.”
Freeman is an applied math and economics major at the University of Southern California, and he copublished a paper titled “Irreducible Risks of Hedging a Bond With a Default Swap” at the age of 16. He told the FT that he has invested alongside his uncle for years, previously interned at a hedge fund named Volaris Capital, and mostly raised the money for his Bed Bath and Beyond bet from friends and family.
He arguably lucked out with the timing of his sale. Bed Bath and Beyond stock fell as much as 19% on August 17, after Ryan Cohen, the retailer’s largest shareholder and GameStop’s chair, disclosed that he intended to dump his entire 12% position in the company.
Bed Bath and Beyond shares had spiked on August 16 after Cohen confirmed he still held bullish call options on the stock. Cohen helped spark GameStop’s surge in January 2021 — and he kick-started the wider meme-stock boom — by investing in the video-game retailer and pushing for changes at the company.
Freeman didn’t immediately respond to a request for comment from Insider.
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