Shares in US chain Bed Bath & Beyond Inc (Nasdaq: BBBY) have tumbled more than 40% since billionaire investor Ryan Cohen exited the struggling retailer this month.
The company’s stock soared in March after Mr Cohen’s firm RC Ventures revealed he owned a significant stake to become the company’s second largest shareholder.
The boost was mainly due to a rally of small investors who were quick to jump on the bandwagon in the hope that Mr Cohen could reinvigorate Bed Bath & Beyond’s ailing financial position.
His investment was accompanied by a letter to the board which ripped into its business strategy, attacked the company’s poor financial health, and outlined a new path forward.
The news of Mr Cohen’s involvement with Bed Bath & Beyond’s potential turnaround sent the share price into a frenzy – rocketing 350% this month.
But it all came crashing down last week after news that he had dumped the stock which had earned him nearly $70 million in just five months.
The company’s share price fell another 16% overnight.
Entire stake sold
RC Ventures confirmed in a regulatory filing that its entire stake in Bed Bath & Beyond had been sold.
The stake amounted to 7.78 million shares at weighted average prices ranging from $18.68 to $29.22 – resulting in a profit exceeding $58 million.
This was a windfall for Mr Cohen, who purchased his Bed Bath & Beyond shares at an average price of $15.34.
Bed Bath & Beyond has since disclosed it is “working expeditiously” with external financial advisers to strengthen its balance sheet.
Recent quarterly earnings showed the heavily indebted retailer suffered a net loss of $358 million and had just over $100 million in cash, compared to $1.1 billion in the previous corresponding period.
News that the company is hiring a law firm known for bankruptcy proceedings is also believed to be negatively impacting market sentiment.
When Mr Cohen first tapped into a Bed Bath & Beyond shareholding, retail investors had pinned their hopes on him turning the company around in much the same way that he changed the fortunes of video gaming chain GameStop after buying an initial 10% interest in 2020.
That stake involved a $76 million spend on 9 million shares priced at around $8 each.
In March this year, Mr Cohen boosted his holding in GameStop to 11.9% by spending $10 million on a further 100,000 shares.
According to the regulatory filing, he began buying at $96.80 per share and finished his spree as the stock jumped to around $108 per share.
The move was labelled a “huge vote of confidence” in GameStop as RC Ventures had not purchased additional shares in over 12 months.
GameStop had originally been written off as a relic of an era where a massive retail footprint was essential and consumer interest was defined by Black Friday crowds and blockbuster game releases.
Mr Cohen had expressed interest in being more actively involved with the company’s decision-making in order to produce the best results for all shareholders.
He offered investors a “future-oriented vision” for the gaming retailer focused on digital sales, esports, streaming and mobile gaming.
He pressed bosses to make changes, secured several seats on the GameStop board and set about revitalising the company.
In January, Mr Cohen was appointed to GameStop’s board of directors, which triggered a 1,500% increase in the company’s share price over the following two weeks.
In June, he became chairman and has since overseen a management and board makeover.