Khan is a professional trader and business writer with over 7 years of experience in several financial markets. Khan takes pride in sharing insightful articles with his readers that help them improve their investment portfolios.

2022-03-07 20:33

Bed Bath and Beyond closed up by 35% after GameStop Chairman Ryan Cohen announced that he now controls roughly 10% of Bed Bath & Beyond and wants the housewares store to consider strategic alternatives, including a full sale.

Cohen’s statement on buying the stake

Cohen, who co-founded online pet supplies store Chewy and is chairman of the board of gaming retailer GameStop Corp, criticised Bed Bath & Beyond for a "overly ambitious" approach that included compensating senior executives and failed to recover market share losses. Cohen wrote in a letter to the company's board in which he said:

"We believe Bed Bath needs to narrow its focus to fortify operations and maintain the right inventory mix to meet demand, while simultaneously exploring strategic alternatives that include separating buybuy Baby, Inc. and a full sale of the Company."

Cohen stated in the letter that his investment firm, RC Ventures LLC, controls 9.8% of Bed Bath and Beyond. BBBY stated that it will look into Cohen's letter. On Monday, shares of the heavily shorted business were up roughly 60% to $26. According to S3 Partners, short interest in the firm has increased 12 percent in the last week, with 30.9 million shares shorted, or around 33.3 percent of the free float. The analytics firm anticipates that the trend will reverse as a result of the RC Ventures announcement this morning.

Last year, Bed Bath & Beyond was a component of the meme stocks craze, in which retail investors spurred eye-popping rises in certain shares by coordinating through internet message boards Reddit and Stocktwits, costing short sellers billions of dollars.

Cohen is interested in the long-term
Cohen is fighting for improvements after three activists and the corporation negotiated an agreement in 2019 that resulted in the appointment of four new directors to the board. The firm slammed the company for failing to respond to customers' rising preference for online purchases. Immediately after the agreement, the business appointed Mark Tritton as CEO, but Cohen claims Tritton has failed to handle supply chain turbulence and presided over a 14 percent reduction in core sales compared to the previous year in the most recent quarter.

Cohen stated that he is interested in the long term and would not condemn management for building the groundwork for future value creation, highlighting his own approach at GameStop, where he has provided few information about how he intends to resurrect the firm. Cohen wants Bed Bath & Beyond to simplify its "scattershot approach" and explore splitting the buybuy Baby business or selling the entire company, which he believes would be better held by a private equity firm.

BBBY is now up more than 40% for the year.