It’s a tragic betrayal straight out of your favorite TV show: A billionaire has made money at the expense of his biggest fans. Ryan Cohen—venture capitalist, billionaire activist investor, co-founder of pet retailer Chewy, chairman of video game retailer GameStop—was the chosen one. He was the meme king, the silverback ape, the man with the tendies. It was prophesied he was supposed to end Wall Street’s profiteering, not join it. To take stock prices to the moon, not leave them in the red.
All that has changed after Cohen dumped his shares in a company that meme stock investors piled into simply because he had invested.
Five months ago, Cohen revealed a 9.8 percent stake in Bed Bath & Beyond in a letter to the company’s board that ripped into the company’s business strategy, raised alarms about its poor financial health, and outlined a new path forward. At the time, the news sent the stock into a frenzy. Bed Bath & Beyond’s shares surged 61 percent on the news of Cohen’s involvement, huge for a company that had consistently underperformed major stock indexes and a host of competitors for the past decade.
Wall Street wasn’t alone in its excitement—meme stock traders who congregate in Wall Street Bets, a subreddit full of users who trade on the stock market like a gambling video game, also saw an opportunity. This community not only helped spark GameStop’s trading frenzy last year, but idolizes Cohen for the perceived role he played in the mythologized fight against GameStop’s short sellers.
“The meme king will reign for 1000 years. You shall not stop him. You will hear his name from generation to generation,” one poster wrote in a thread talking about Cohen’s letter and then-newly-revealed stake in Bed Bath & Beyond. “No one man should have all that power? This is who Kanye was referring to. Even he has seen what is transpiring in front of our eyes. Ryan Cohen will never be matched.”
Encouraged by Cohen’s involvement, many Redditors made posts bragging that they had poured whatever they could afford (and even what they couldn’t) into Bed Bath & Beyond. They claimed to invest their life savings, to take out massive loans, to exit all their other investments just to buy in on Cohen’s latest venture. For many, they were indulging a desperate bid to recreate GameStop’s trading frenzy. And they did, making and losing money as retail trade activity drove price swings, but poor financial reports painted an increasingly bleak picture for the company’s future.
On Thursday, Cohen disclosed in a Securities and Exchange Commission filing that he was selling his entire stake in Bed Bath & Beyond—some 7.78 million shares and options to buy an additional 1.67 million shares. Cohen spent months building that position, costing him about $119 million for the shares and $1.7 million for the options through his RC Ventures fund. He sold it all in two days (August 16 and 17) during a rally sparked by Wall Street Bets traders at prices between $18 and $29 and reportedly netted $68.1 million in profit. The stock has tumbled since then, opening at $9.60 on Monday.
Wall Street Bets is, in a word, upset.
The subreddit speaks best in memes and is flooded with a litany of them expressing anger at the perceived betrayal by a venture capitalist they thought was on their side, as well as mocking those who bought into that narrative.
One thread titled “The 4 stages of wsb” opens with an image featuring four panels of a man applying clown makeup to get ready. “Papa Cohen lead the way,” followed by, “If RC is in, I’m in! This is going all the way to $80,” followed by, “He didn’t sell! It’s Fud! He would never abandon us.” The final panel and its ready-to-go clown reads: “What about RC? The play was never about him. He is just a smart investor.”
Another popular post titled “It’ll bounce back right Ryan” features a cartoon rendition of the ending for Of Mice and Men, where George Milton shoots his friend Lennie Small while distracting him with a dream they once shared. George is labeled “Ryan Cohen” while Lennie is labeled “$28 ALL IN FOMO APE” and says, “BBY IS GOING TO $80, RIGHT RYAN?” George/Cohen raises the gun and says, “SURE IT IS LENNIE, SURE IT IS…”
“This isn’t accurate the guy with the gun felt bad about what he had to do,” one Redditor commented.
This all gets to the point: Many investors on Reddit who buy into the meme stock craze see Cohen and other leaders in the space—for example, AMC CEO Adam Aron—as being on their side. The reality, of course, is that they’re on one side only, and that’s the side of making money.
“I will say this about Primatologist-in-chief Ryan Cohen: he has ridden a wave of Jane Goodall’s finest all the way to the bank and is a lot smarter than Bed Bath which should have bailed before him.. Ryan, please come on Mad Money tomorrow and tell us how you did it!!” Mad Money‘s Jim Cramer tweeted last week, before Cohen’s share sale was announced.
The incident calls into question how executives at meme stock companies have been engaging with online traders, often painting themselves as allies. Last year in June, it was revealed that 80 percent of AMC’s shares were owned by retail traders. CEO Aron responded with a campaign aimed at engaging online communities of traders, including a pantless Youtube interview where he was heralded as a “silverback” in reference to Wall Street Bets traders calling themselves apes.
In the previous quarter, AMC’s meme stock frenzy had raised over $1 billion. AMC quickly developed a plan to use the frenzy to raise even more capital, initially proposing the issuance and sale of 500 million sales before whittling it down to 25 million. “If you arm us with the tool—meaning stock as the tool—to go find value-creating opportunities for AMC shareholders, we can do that,” Aron said in the pantless Youtube interview. And the plan worked: at the start of this year, AMC had sat on a $2 billion war chest thanks to meme stock traders and a path to survival that was nowhere to be found the previous year.
Wall Street Bets traders likely expected something similar to happen with Bed Bath & Beyond, especially once you consider that Cohen became GameStop chairman after penning a similar letter disclosing his stake and demanding changes to the video game retailer’s business strategy. Since the GameStop rally, traders have been chasing that same formula for a trade that will make someone incredibly rich while hurting nefarious, wealthy investors. This means that a new meme stock gains popularity because of vibes (chatter over whether the chief executive acknowledged the subreddit) and superficial details (was this firm involved in a previous meme stock trading frenzy?) instead of basic fundamentals.
Bed Bath & Beyond’s fundamentals were bad, which was why Cohen got involved. They have continued to decline in worse ways despite Cohen’s involvement, which is why he left. It was a bad investment, except for the profit he made thanks to the retail traders who idolized him.
It is an open question right now whether the company can actually survive. It has been battered by competitors like Amazon, it’s experiencing supply chain issues that have deteriorated the quality of its physical storefronts and their inventory. On top of it all, the company is staring down an unmanageable debt and a sales slump that has led to wider and wider losses each quarter.
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