Ryan Cohen is not your savior

Ryan Cohen is not your savior

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Monday, August 22, 2022

Today’s newsletter is from Brian Sozzia general editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi is at LinkedIn.

Dear meme stock community,

I know we had our differences, but listen to me.

I’d like to think I understand all of you (or most) of you – from the early days when the movement against “the man” (aka Wall Street) – started with GameStop in 2020.

I get the urge to build wealth with little capital to start with. I buy 10 shares of a $5.00 share and hope it goes up to $25, and how it can change my life. I understand how the entire investment process seems rigged against someone simply trying to make enough money in the market to send their child to college. I saw this firsthand in my analyst days.

I also understand how intoxicating it can be to fall in love with a stockpile of stories, with that intoxication usually being fueled by a leader who has been put on a pedestal and almost becomes this mythical creature.

And in that regard, I understand your love for Ryan Cohen’s mythical creature. I see your enthusiastic posts on Reddit, believing Cohen will change the future of Bed Bath & Beyond and GameStop. Or, at the very least, you hope he writes another nasty letter to the management of Bed Bath & Beyond to get the action going. And ideally, it presents a great view of stock price movement for GameStop – where the founder of Chewy serves as chairman.

What I hope you will consider today is that Ryan Cohen is a billionaire who is trying to increase his wealth and market influence through RC Ventures because he can. And please understand: if that means he has to run you over to make it happen, he’ll do it without question.

A person shops at a Bed Bath & Beyond store in Manhattan, New York, USA, June 29, 2022. REUTERS/Andrew Kelly

A person shops at a Bed Bath & Beyond store in Manhattan, New York, USA, June 29, 2022. REUTERS/Andrew Kelly

How is this not one of the threads after last week of shenanigans on Bed Bath & Beyond?

Bloomberg calculated that Cohen made $68.1 million in profits from his stake in Bed Bath & Beyond in seven months. A big part of that profit came, no doubt, in the last few days of trading: stocks rallied early last week on reports of Cohen’s call option on the BBBY. On Thursday, a filing indicates that Cohen has dropped out of participation. Shares are down 40% on Friday and are still under pressure as investors refocus on the company’s dire fundamentals.

In short, Cohen played an entire ecosystem of average investors like a violin in true Wall Street style. Cohen made his money and left a bunch of ordinary people holding the bag. He could do the same with GameStop, if he wants, or other smaller-cap companies. Because? Because he can and you can’t.

Another relevant point: Cohen has all but disappeared from the media (aside from his weird tweets) as he tries to perpetuate his status as a mythical creature. Here’s Cohen on Yahoo Finance Live in 2019 around the time of Chewy’s IPO. As investors, it’s nice to see people you trust.

All this to say: Be careful who you ride with, meme community. Cohen did not earn their trust, nor did he earn that “activist” label that many people have attached to him. Do you want to get a sense of true activist investing? Dive deep into Elliott Management. They do things in style.

Happy trading!

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