Bed Bath & Beyond Stock Skyrockets After Billionaire GameStop Chair Cohen Discloses $120 Million Investment

Topline

Shares of retailer Bed Bath & Beyond soared Monday after billionaire investor Ryan Cohen disclosed an outsize stake in the firm and sent a letter to management blasting the company’s dismal stock performance and falling revenues—mounting an effort similar to one that helped usher in massive stock gains for fellow brick-and-mortar GameStop last year.

Signage outside a Bed Bath & Beyond store in Clarksville, Indiana.

Key Facts

After skyrocketing as much as 110% in premarket trading, Bed Bath & Beyond stock surged 34% to $21.71 on Monday after Cohen sent a letter to the firm on Sunday disclosing his investment firm had purchased a roughly 9.8% stake to become one of Bed Bath & Beyond’s top five shareholders.

In the letter, Cohen blasted management for “disappointing shareholder returns and perpetual underperformance” over the past ten years and laid out suggestions to help spur stock growth—including selling or spinning off the firm’s infant-focused brand Buy Buy Baby, evaluating a full sale to a “well-capitalized acquirer” and making changes to company leadership.

Cohen, who cofounded and led pet-focused firm Chewy as chief executive until 2018, said he was “not in a position” to join Bed Bath & Beyond’s board, given his role as GameStop chair, but he cautioned that his investment firm would hold the retailer’s board and management accountable “if necessary.”

He also specifically criticized CEO Mark Tritton for receiving about $27 million in compensation over the past two years, a number the investor pointed out exceeded CEO compensation for “much larger retailers” such as Kohl’s and Macy’s.

In a statement, Bed Bath & Beyond said it had “no prior contact” with RC Ventures before its disclosed investment but will “carefully review” the letter and “[hopes] to engage constructively around the ideas put forth.”

During the Monday surge, shares of Bed Bath & Beyond—one of the highly shorted stocks retail traders plowed into early last year—nearly returned to their closing high of $35.33 during the meme-stock squeeze of January 2021, but they’re still down more than 70% from an all-time high in late 2013.

Crucial Quote

“Approximately 18 months after releasing a 170-page cover-the-waterfront plan, [Bed Bath & Beyond] is struggling to reverse sustained market share losses, stem years-long share price declines and navigate supply chain volatility,” Cohen wrote in the letter, criticizing the firm for its latest quarterly results, which showed same-store sales dropped by 7% year over year. “These results cannot be solely blamed on the pandemic when other retailers are nearing or exceeding 2019 sales levels. That is why we feel compelled to scrutinize the viability of the company’s extremely ambitious and widely touted strategy.”

Big Number

$119.4 million. That’s how much Cohen’s investment firm, RC Ventures, has spent to purchase nearly 7.8 million Bed Bath & Beyond shares—worth about $172 million—since January 13, according to a Monday regulatory filing.

Key Background

Last January, Reddit traders famously declared GameStop their meme stock of choice as they bought up Wall Street’s most heavily shorted companies. Like Bed Bath & Beyond, GameStop was among the worst hit of brick-and-mortar retailers over the past decade, as independent companies like Minecraft gobbled up market share, but its shares began to surge at the tail end of 2019, when Cohen started buying up shares at about $6 and blasting management for “lack[ing] the mindset, resources and plan needed to [help GameStop] become a dominant sector player.” Cohen was tapped as the firm’s chair in April but has so far remained fairly mum about his turnaround plans, though the company has teased plans to launch a marketplace for the buzzy blockchain-based collectibles known as non-fungible tokens. In December, the firm reported third-quarter revenue of $1.3 billion, about 30% more than the same period one year prior, but a wider than expected loss of $105 million.

Tangent

After skyrocketing more than 800% last January and then plunging as much as 70%, GameStop and other meme stocks have continued to draw massive fanfare from retail investors, despite bouts of intense volatility. “The retail force behind this movement is still strong, so it is anyone’s guess how much larger this can grow,” Oanda senior analyst Ed Moya wrote in a recent note.