‘War on Wall Street’? Reddit fame sees Bed Bath & Beyond shares embark on wild ride as student scoops $110m | World News
The latest blow in the “war on Wall Street”? Viral attention from the online Reddit community that sent GameStop into the stratosphere has seen shares in a struggling US retail chain embark on a rollercoaster ride this week – earning a 20-year-old student $110m in the process.
It is a frenzy that conjures up memories of last year’s meme stocks saga that saw amateur online investors cause hedge fund giants to lose billions of dollars.
Meme stocks – stocks that gain attention among amateur investors through social media – shot to fame during the GameStop saga early in 2021.
Despite the company struggling in the post-pandemic landscape, stocks in Bed Bath & Beyond surged by more than 250% in the last month before tumbling this week.
The attention has been driven by the Reddit WallStreetBets forum, with one commenter dubbing it “blood bath and beyond”.
As Bed Bath & Beyond’s stock (BBBY) kept going higher in recent days, many voices on Reddit and other social media sites urged other investors to keep buying.
Along the way, some revelled in facing down the professional investors who had bet Bed Bath & Beyond’s stock would fall.
Student, 20, scores $110m before share prices tumbles days later
Jake Freeman, an applied mathematics and economics major at the University of Southern California, told the Financial Times how he bought nearly five million shares in Bed Bath & Beyond (BBBY).
Shares in the company had recently plummeted amid poor performance and the ousting of its chief executive.
Mr Freeman bought his stake at under $5.50 (£4.65) a share. By Tuesday this week the stock had soared to more than $27 (£22.81) a share amid huge online attention.
As the stock surged, he sold more than $130m (£109.8m) worth of stock, earning a profit of around $110m (£92.8m).
On Thursday, shares in Bed Bath & Beyond tumbled more than 20% after famed meme-stock investor Ryan Cohen revealed that he intended to sell his entire stake of almost 12 per cent in the company.
Frenzy conjures memories of GameStop drama that cost Wall Street billions
The clash of amateurs and traditional Wall Street investors was a key feature of the GameStop drama last year – with many Reddit investors citing the fallout from the 2008 financial crash as motivation for challenging the status quo.
The wild ride began in January 2021 when the struggling video game retailer saw an unprecedented rise in its share price.
Amateur, or retail investors, communicating through social media, particularly on Reddit’s WallStreetBets community, created a surge in interest in the company.
They thought the market was undervaluing the “bricks-and-mortar” computer game store, and rallied around it, forcing the price of the stock upwards with their purchases.
Shares in the company soared over 500% at one point, creating huge profits for some amateur investors who sold up and devastating losses for professional hedge funds who had shorted the stock and were left exposed.