College student Jake Freeman makes $110 million by trading Bed Bath & Beyond meme stocks
The Financial Times reported that his holdings were worth more than $130 million at the time, netting him about $110 million.
His timing was impeccable: Within 24 hours, activist investor Ryan Cohen signaled his intention to sell the 9.8 percent that was purchased through venture capital firm RC Ventures. It was Cohen’s interest in Bed Bath & Beyond that lit up online message boards like Reddit’s r/WallStreetBets, and drove up its share price. So when reports emerged Wednesday afternoon that Cohen had filed a Form 144 with the Securities and Exchange Commission — a notice of intent to sell stock — the stock fell in after-hours trading. It closed Thursday at $18.55, down 19.6 percent, and plunged another 35 percent after hours.
Cohen has a devoted following among small retail investors because of his key role in the GameStop frenzy. In late 2020 and early 2021, traders on Reddit and other online communities snapped up the video game retailer’s stock, intent on capitalizing on a company that many institutional investors had written off. The stock rose from nearly $5 to more than $480 — a stunning increase for a brick-and-mortar business in decline. The run-up led to froth and volatility, and the meme stock was born.
Small investors banded together and looked for other companies that Wall Street shorted, or bet against. The strategy outlined on Reddit used what is known as a short squeeze, where those who bet against a stock – usually hedge funds – are forced to buy shares to close out their position.
Cohen founded the online pet food company Chewy and later became chairman of GameStop. His plan to revive the video game retailer was fueled by an unexpected explosion of online enthusiasm for the company last year, which sent its share price soaring and made it the first of many meme stocks. Others included movie theater chain AMC, smartphone maker BlackBerry and telecom company Nokia.
Freeman attends the University of Southern California, where he studies applied mathematics and economics, according to the Financial Times. The report said he raised money for the initial investment from Freeman Capital from friends and family. His LinkedIn profile indicates he has interned at New Jersey-based hedge fund Volaris Capital.
In a letter to the company’s board on July 21, he said Bed Bath & Beyond “is facing an existential crisis of survival.” He urged it to stop burning cash so quickly, restructure its capital and raise more funding.
“Freeman Capital’s plan for restructuring of [Bed Bath & Beyond] consists of two crucial legs: cutting debt and raising capital,” he wrote.
Bed Bath & Beyond has struggled for years. First-quarter sales were 25 percent lower than a year earlier, when the retailer posted a net loss of $358 million. It also has $1.37 billion in debt.
With the stock rising more than 300 percent as it gained online attention, Freeman took the opportunity to liquidate his holdings, SEC filings show, selling $130 million worth of stock on Tuesday.
Freeman told financial news website MarketWatch that he “didn’t expect the stock to go up the way it did,” adding that he now thinks it has too much downside risk.
“I expected it like [Bed Bath & Beyond] better structured balance sheet to unlock value. I felt myself on the elevated levels [the stock] was not worth it from a risk/reward point of view.”
According to the Financial Times, Freeman and his uncle Scott Freeman, a former pharmaceutical executive, have each taken an activist stake in drug company Mind Medicine, a New York-based company that focuses on psychedelic-inspired drugs.
