Geist Flummoxed By College Student Making $110 Million Off Bed Bath & Beyond Stock: ‘Help Me Understand’
MSNBC’s Willie Geist had a little sticker shock Friday over a 20-year-old college student earning $110 million off trading Bed Bath & Beyond stock.
Jake Freeman, who is studying economics and applied mathematics at the University of Southern California, acquired 4.96 million shares of the home goods retailer “at under $5.50 a share. On Tuesday, Bed Bath & Beyond surged to more than $27 a share. As the stock soared, Freeman sold more than $130 [million] worth of stock from his TD Ameritrade and Interactive Brokers accounts,” according to The Financial Times.
Freeman raised around $25 million mainly from family and friends to purchase his 6.2 percent stake in the company, which has been struggling financially.
Bed Bath & Beyond’s stock skyrocketed this month from $5.77 on Aug. 1 to $23.08 on Wednesday before sliding.
On Friday’s Morning Joe on MSNBC, Geist expressed astonishment over Freeman’s accomplishment and asked CNBC’s Andrew Ross Sorkin to explain what transpired.
“Andrew, you got to help me understand and our viewers understand this wild story about Bed Bath & Beyond. You’ve got a 20-year-old math major at Stanford … I don’t know how a [20-year-old] bought a 6% stake in Bed Bath & Beyond. You’ll explain to me, but yesterday sells the stock and makes $110 million?”
Sorkin explained “there’s two things going on.”
First, Sorkin explained that the stock craze surrounding Bed Bath & Beyond stock was as a result of the Reddit page wallstreetbets, which was responsible for the surprising stock spikes of GameStop and AMC. This trend allows its adherents to make a quick profit.
Bed Bath & Beyond has become one of these what they call meme stocks. If everybody remembers the whole sort of GameStop phenomenon, now probably close to a year-and-a-half ago, folks on Reddit who decided that these were companies that a lot of people had shorted, which means they had bet against these companies effectively and they said we’re going to stick it to the man and we’re going to buy what are called options, effectively betting that the stock is going to go higher and we can actually create a sort of pressure point, if you will, that will actually push that stock up and create this sort of self-fulfilling prophecy.
Sorkin continued:
There were a lot of folks who bought into Bed Bath & Beyond in the same way and Ryan Cohen, who is an investor who ended up becoming the chairman of GameStop, made a big bet on Bed Bath & Beyond. Then a lot of his followers dumped into it and bought into it hoping that it would go up. He put three people on the board and bought stock options claiming that the company could be worth $60 to $80 at some point. This is when the stock was trading at $10, $14.
Well, Ryan Cohen saw that the stock got up to $25, $30. He dumped his shares just yesterday. The stock is now down 40 percent. But in the meantime, there is a whole bunch people that got rich knowing when to get out.
But unfortunately, as with all of these stories, Willie, there is a lot of people holding the bag and unfortunately there are people all over online, mostly retail investors, frankly, who thought I’m going to follow this guy Ryan Cohen in, I made money on GameStop, I’m going to do it again and, well, they didn’t do it again.
Bed Bath & Beyond’s stock plunged after Cohen, co-founder of the pet supplies site Chewy, “disclosed on Wednesday evening that he intended to sell his entire stake of almost 12 per cent in the company,” according to The Financial Times. Cohen made around $60 million selling his shares.
“I certainly did not expect such a vicious rally upwards,” Freeman told The Financial Times on Wednesday. “I thought this was going to be a six-months-plus play . . . I was really shocked that it went up so fast.”
Watch above, via MSNBC.
