After activist investor Ryan Cohen stated in a filing that he intended to sell his whole investment in the company through his firm RC Ventures, Bed Bath & Beyond shares fell during extended trading on Wednesday.
The total number of shares that RC Ventures has in Bed Bath is 9.45 million, and it proposed selling those shares in a Form 144 that was submitted to the Securities and Exchange Commission. An official notice of a potential security sale is provided by a Form 144.
According to earlier SEC filings, the total cost of the 7.78 million shares directly owned by RC Ventures, minus brokerage costs, is about $119.4 million. Additionally, removing those commissions, the total purchase price of the company’s call options exercisable into 1.67 million shares directly controlled by RC Ventures is close to $1.8 million.
A buyer of call options has the option, but not the duty, to buy stock at a certain strike price. Cohen had options with $60, $75, and $80 as their strike prices.
Cohen would make nearly $60 million if he were to theoretically be successful in selling all of his Bed Bath Common Stock at Wednesday’s closing price of $23.08. Cohen might have made more money if he had sold the option contracts as well.
Early in March, Cohen made his almost 10% ownership of Bed Bath through his activist firm public for the first time. His assets, according to FactSet, were worth 11.82% as of the end of March.
In a letter to Mark Tritton, then-CEO of Bed Bath & Beyond, Cohen, the chairman of GameStop and the creator of Chewy, expressed his belief that the home goods retailer was having difficulties managing supply chain issues and reversing market share erosion. Additionally, he pushed the retailer to think about selling its Buybuy Baby franchise.
Later in March, Bed Bath said that it had reached an agreement with the activist’s company to immediately appoint three directors selected by Cohen to its board of directors.
Three months later, in June, Tritton was unceremoniously fired by Bed Bath as CEO, and Sue Gove, a restructuring expert and independent director, was named as his interim replacement. This came after the business experienced another quarter of weak sales and significant losses.
According to a Bed Bath & Beyond spokeswoman, the store is “pleased to have reached a constructive agreement with RC Ventures in March and are committed to maximizing value for all shareholders.”
“Specifically, we have been working expeditiously over the past several weeks with external financial advisors and lenders on strengthening our balance sheet,” The company will provide more details in an update at the end of the month, she said in a statement sent to media via email.
Recently, Bed Bath & Beyond has experienced liquidity problems as a result of its cash reserves running low before to the holiday shopping season and during the back-to-school and back-to-college selling seasons.
In its fiscal first quarter, Bed Bath reported having about $108 million in cash and equivalents, down from $1.1 billion the year before. Its net losses increased from $51 million in the same time in 2021 to $358 million in 2022.
Even so, the meme stock mania has resurfaced recently, and Bed Bath has been the main winner. The stock had risen 58% as of Wednesday’s close, considerably surpassing the general market.
With significant trade activity, the retailer of home products’ stock has increased by more than 300% just in August. According to FactSet, the stock traded for roughly 400 million shares on Tuesday and another 249 million shares on Wednesday.
According to independent data firm Quiver Quantitative, Bed Bath was by far the most discussed company on Reddit’s Wall Street Bets page over the previous week.
Users emphasized on the Wall Street Bets page on Wednesday that the Form 144 is solely intended for giving notice of a proposal to sell after word of Cohen’s filing started to spread.
A user named “foyerhead” said: “Ryan Cohen did not sell. FORM 144 is the ‘right’ to sell. It does not mean you are selling or have sold. If you own 10% or greater of a company, you have to file the form giving you the right to sell within the next 90 days.”
The user DeadSol wrote the following comment: “Of course he didn’t sell. He’s an ape like us.”
